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If you think Medicare, Medicaid or health insurance will pay the cost of long-term care- STOP and think about buying a long-term care policy.
The average cost for one year in a nursing home is $40,000, but can be close to $100,000 in some big cities. Round-the-clock care at home can be just as expensive.
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Medicare does not pay these bills beyond a short period of time after a hospital stay. Health insurance rarely pays any of the cost. Unless you have so little money that you will qualify for Medicaid, or so much money that you can pay the bills out of your own pocket, you should consider long-term insurance.
- Preserve your assets for your family instead of spending the money on long-term care.
- The odds are one in three that a man over 65 will need long-term care; for a woman over 65, the odds are one in two.
- New rules make it hard to qualify for Medicaid.
- Premiums may be partially tax-deductible.
- The best policies pay for care in a nursing home, assisted living facility or at home. Benefits are typically expressed in daily amounts, with a lifetime maximum. Some policies pay half as much per day for at-home care as for nursing home care (e.g. $100 and $200). Others pay the same amount, or have a "pool of benefits" that can be tapped as needed.
- ELIGIBILITY TRIGGERS (when benefits begin) include:
a. The inability to perform two or three specific "activities of daily living" without help. These include bathing, dressing, eating, toileting, and "transferring" or being able to move from place to place or between bed and chair.
b. Cognitive impairment. Most policies cover stroke, Alzheimer’s and Parkinson's disease, but other forms of mental incapacity may be excluded.
c. Medical necessity, or certification by a doctor that long-term care is necessary.
d. Prior hospitalization. Some older polices require a hospital stay of at least three days before benefits can be paid. This requirement is very restrictive and should be avoided.
- A benefit period that may range from two years to lifetime. You can keep premiums down by electing coverage for three to four years -- longer than the average nursing home stay -- instead of lifetime.
- A waiting or "elimination" period. Premiums will be lower if you pay for an initial period of care yourself instead of electing first-day coverage.
- Inflation protection is an important feature, especially if you are under 65 when you buy benefits that you may not use for 20 years or more. The best inflation provision compounds benefits at 5 percent a year.
- Guaranteed renewable policies must be renewed by the insurance company, although premiums can increase if they are increased for an entire class of policyholders.
- Waiver of premium, so that no further premiums are due once you start to receive benefits.
- Third party notification, so that a relative, friend or professional adviser will be notified if the policyholder forgets to pay a premium.
- Restoration of benefits, so that maximum benefits are put back in place if you receive benefits for a time, recover, and then go for a specified period (typically six months) without benefits.
- Non-forfeiture benefits return a portion of premiums or keep a lesser amount of insurance in force if you let the policy lapse. This provision, required by some states, adds to the cost of the policy.
- Find out if long-term care benefits are available through a group policy from your employer or as benefits from an existing life insurance policy. Then consider supplementing those benefits with a private long-term care policy.
- Consider buying a policy before age 60 or 65, because premiums increase sharply between ages 60 and 70. Buying much earlier is even more cost-effective, and also guarantees your insurability.
- Evaluate your other financial resources, then consider buying a policy that will pay most but not all of the average nursing home cost in your area. Paying part of the cost out of your own pocket will reduce the premium.
- Buy a policy with a waiting period of two to three months before benefits are paid. Again, paying the initial payment out-of-pocket will keep costs down.
- Check with several companies and agents, comparing both benefits and costs. In addition to checking current costs, find out how often each company has raised premiums in the past.
- But don’t rely on price alone. MOST IMPORTANT: Because you may not collect for decades to come, be sure to buy from a company that has been around for some time and that is financially stable.
Consider a higher deductible. Many times the savings more than outweighs the extra deductible.
Look for a medical plan that offers a managed care plan that includes your doctor. These plans are often less in cost.
Make sure you are with a company that focuses on health insurance. These companies have a tendency to have a long term commitment.
Consider the future, if your health changes you may be with your company for a long time. It is important to choose the right company the first time.
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