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 determains if you can even purchase
the coverage to start with.
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.
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