Long Term Care Update

Poor economy and world events are not the
only worries to our financial well being.

Written by Matt McCann,
 a long-term care insurance specialist from the Chicago suburb of Darien, Illinois.

The economy and world events do have an impact on savings and future/or current retirement. However, many people fail to protect their assets from the biggest involuntary risk they face ... the risk of needing long-term health care.

Clearly, as the war with Iraq winds down, worries about North Korea's nuclear weapons buildup, and the dark threat of terrorism on American soil all make for exceptionally nervous markets and an economy, which could be much better but under these circumstances, could be much worse. Yes, the economy is better than much of the mainstream media would like to tell you, but we still have a long road ahead although we are heading in the right direction.

Still. a good planner must plan in every area if you want to succeed. Preserving the assets you have from risks you have some control over is now even more important than ever before.

Look at the things that could place your savings and assets at risk. Now, forget things you can't control. We can't control war or terrorists, for example. We hope our government will take the correct action to limit our risks.

OK, what does that leave? Your home could burn down. But you should be OK from a financial standpoint since you have homeowners insurance. While the chance of something happening to your home is nil, and we all complain about the cost of homeowners insurance increasing, we all have our homes insured. The average homeowner's insurance claim is $3800.00. We know it could be worse so we have insurance, although the odds are on the insurance company's side.

We have our cars, SUV's, boats and other vehicles insured. Average claim on a vehicle is $3100.00. But, with the risk of liability and total loss of the vehicle we have insurance to protect our assets.

Most of us have health insurance or Medicare if we are 65 and over. Most people's health care claims are for under $50,000 lifetime.

But think, for just a second, what happens if you or a loved one required long-term health care? Perhaps you think your health insurance will pay for it, or Medicare if you happen to be over 65.

Millions of Americans struggle each and every day with serious long-term care issues. And far too many people realize too late that private insurance and Medicare do not cover long-term care, and Medicaid offers only limited options.

"Studies show three out of every five Americans over 65 will need long-term care while, at the same time, we have no comprehensive long-term care system in our nation today. Since healthcare insurance does not cover long-term care, families are forced to either pay out-of-pocket for long-term care or spend down their assets to qualify for Medicaid," said Senator John Breaux (D-La.)

Sen. Breaux, a Democrat from Louisiana, is a ranking member of the Aging Committee and a member of the Finance Health Care Subcommittee and one of Washington's big supporters of long-term care insurance.

"Today’s baby boomers need to factor long-term care into their financial and retirement planning, to better protect their assets and better guarantee their long-term options. When planning for retirement, experts now recommend long-term care insurance — in addition to 401(k) plans and IRAs — to protect financial security in retirement. Long-term care insurance, along with other retirement savings, will help secure assets, offer choices of care, and provide peace of mind for the entire family," said Matt McCann, a long-term care insurance specialist from the Chicago suburb of Darien, Illinois.

McCann knows first hand how long-term care can effect a family, not only from his many clients ... but from a personal experience. His mother went into a nursing home at the age of 59 following a major health event.

The cost of nursing homes can range anywhere from $40,000 to $85,000 a year, depending on where in the country you live. While most home-care will cost a bit less, it is still very expensive and comes out of your own pocket.

But it won't happen to you and if it does you won't go into a nursing home because your family will take care of you. First, it can and may happen to you and you can't do much to prevent it from happening. Demographers suggest that if you reach the age of 50 you will have a 50% chance of needing some form of long-term care during your lifetime.

Second, do you really think your family would want to feed you, wipe you after taking you to the bathroom, bathe you, and do a host of other things that many of us will require help with? They might say they will help but the fact is they are going to have major problems with doing so and most times will end up resenting the parent they wanted to take care of in the first place. Your spouse may be too old to help out (can you imagine your husband or wife lifting you and doing those very personal things for you?). Your kids have jobs and children of their own. Your care may well be 24/7 but your children could never spend 24/7 with you unless they had no life of their own.

Third, do you want to burden your family with this even if they were able and qualified to take care of you?

"The fastest way into a nursing home is a plan that involves your children taking care of you. It never works ... experience shows this over and over again. The end result, the parent ends up into a nursing home much faster unless pre-planning occurs in advance," McCann said.

So the federal government has made it clear; they can't pay for everyone's long-term care needs. Medicare does not pay for long-term care and Medicaid pays only when you spend down your assets. The choice is very clear. The only thing stopping you is denial.

"We have a system today where a person goes into a nursing home, and quickly consumes their life savings," said President George W. Bush.

"The President's budget calls for above-the-line tax deductions of long-term care insurance premiums. This is a major message from the federal government, and they have been saying it since the HIPPA act of 1996, the federal can't pay for everyone's long-term care. Too many people will require care in the future. People must plan now," said McCann.

McCann, who is a national speaker on long-term care issues, says people should look into long-term care insurance long before they retire since premiums are based on age at application and your health determines if you can even purchase the coverage to start with.

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Saving for long-term care and retirement simultaneously isn't realistic for most of us; long-term care insurance offers the smart alternative. Long-term care insurance can be written to cover various types of care, including nursing home, home care, assisted living, and respite care. It also doesn't have to cost a lot of money.

What to Look for in a Long-Term Care Insurance Policy?

If you decide you want to buy a policy, McCann suggests to make sure you can answer the following questions:

What daily benefit will you need? The higher the daily benefit, the higher your premium. McCann recommends a benefit of $120 to $180 a day with inflation protection, but you'll need to find the balance between daily benefit and cost for your own situation. Be sure to do some cost comparisons of nursing homes in your area.

How long will benefits last? The typical stay at a nursing home is between three and five years, so make sure your coverage lasts for at least that period. Think about your own family's health history when choosing benefit periods. Have family members traditionally lived to ripe old ages? If so, you may want a longer benefit period. Be careful, however, family history has little to do with your risk of needing care but may have some impact of you having a longer than average stay.

What's the elimination period? The elimination period is comparable to the deductible on your other insurance policies. Your long-term care policy won't begin paying out for a certain number of days. The longer that period is, the cheaper the coverage will be.

Is the benefit inflation protected? Go for the guaranteed annual-inflation increases rather than the opportunity to increase daily benefits down the road. This rider may be more expensive up-front, but you are guaranteed to keep pace with inflation.

Does the policy cover help at home? Some policies will cover the costs of bringing people into your home to help with physical therapy, bathing, dressing, walking, and so on. Make sure the policy doesn't require a prior hospital stay before this benefit is available.

Does the policy cover mental conditions? Sadly, Alzheimer's disease is a reality for many people. Be sure your policy includes all types of dementia. Most companies will cover this, but be sure to ask.

How are premiums waived? A typical policy will waive premiums when you go on claim.

How financially stable is the insurer? Research the financial rating of the company offering the policy. Stick with a company rated "A" or better. Good plans to look at include John Hancock, Transamerica, and Allianz.

Do avoid companies that require their "plan coordinator" to arrange your care. Most good companies have the ability to provide you with a RN who serves as a case manager. This person can recommend and make arrangement for your care. Make sure you can make your own decisions and use providers that you choose.

Also avoid any company that will only pay benefits based on what is "reasonable and customary" in your area. This is the so-called "prevailing expenses" clause. Most
companies will pay you up to the daily benefit you contracted for at the time of care based on the real bill you have. However, companies that have this clause take control of your claim and only pay what they want to pay. You may have a bill for $150.00 and have insurance for a daily benefit, for example, of $140.00. With most companies you would get $140.00 in benefits. But any company with this clause could say that they think the "reasonable" cost in $105.00 and then pay only $105.00 ... leaving you to pay the rest!

Group plans do exist but most offer very limited coverage and much higher prices.

McCann also suggests that you work with an agent who is a specialist in long-term care and who represents many companies.

"Many agents and financial advisors can sell long-term care insurance but really have no clue how policies work and how they are different. Knowing how to set up a plan based on your needs is also very important. So stick with an agent who has this type of experience," McCann says.

Finally, don't wait too long. You can be uninsurable if you already have a serious health problem. The earlier you purchase your policy, the more affordable it will be.

Medical science just gets better so we live longer and longer. Deny this all you want but you are better off planning now. The cost of planning is not that much, check it out now and don't delay. Your family will thank you. Do it now. McCann says the average age of his client is now 54. Plan early and take advantage of your health and youth. In the long-run you will save money and protect your assets from the biggest risk we all face, the risk of needing long-term health care.
Do your financial or retirement plans include protection 
against long-term care expenses? They should! If you are 
like most people, you have insured your health, your car, 
your life, and your home. You have probably worked hard 
to accumulate assets for your retirement years. But what 
if you needed long-term care? Long-term care is a risk 
that can impact or even derail all of your carefully 
thought out plans. Start planning now. 

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