Many people think of longtermcare (LTC) insuranceas nursing home insurance,but a growing number ofseniors are buying policies to make surethey can afford a more pleasant alternative:being cared for at home.
But home health care can be costly.Suppose you found someone to providecare for you at the rate of only $10 perhour. That would still cost $240 per day.That's more than $85,000 per year.Contrary to popular belief, Medicarepays for a relatively small percentage ofLTC costs. Simply qualifying for Medicaidcan force you to spend down most ofyour assets. That leaves LTC insurance asthe most practical option.
Know What You're Buying
Today's policies generally providebroad home care coverage and will payfor a range of services, including homehealth aides from licensed agencies whoassist with personal care; registered andlicensed practical nurses; and occupational,speech, or physical therapists.
Rule of thumb:
Most companies pay a specific dailydollar amount for home health care, typicallyranging from $50 to $500. Makesure you get sufficient coverage by firstfinding out the daily rate of care in yourarea. Cover at least onehalf to three quarters of the cost of LTCwith insurance. You may want to add aninflation rider that allows the daily benefit to increase with the cost of living, particularlyif you're young and don't expectto use your coverage for several years.
You can typically choose care for aperiod that ranges from 1 year to a lifetime.Only a relatively small percentageof LTC needs to extend beyond 5 years.
Make sure you understand when youwill be eligible for benefits. Often, benefits are payable when you are unable toperform a certain number of activities ofdaily living, such as bathing, toileting,dressing, eating, etc. Some policies payonly when your doctor certifies that LTCis medically necessary. Another importantfactor is whether you can receive benefitsif you are mentally incapacitated.
When you purchase your policy, lookfor one that will allow you to upgradeyour coverage in the future without medicalexams. Companies improve theirpolicies regularly, and you'll want tomake sure you can take advantage of newfeatures and benefits.
Save on Policy Premiums
Your age is often the biggest influenceon the price of LTC insurance, so if youthink you want coverage, buy now. You're healthy now, but youmay not be in the future, and your applicationcould be denied because of preexistinghealth problems. If you're marriedand you both need coverage, companiesoften offer discounts for couples.
Tax changes in the 1990s have madepolicies more affordable. Currently, premiumsare considered health insurancecosts and could be deductible if you itemize,subject to certain limitations. Buyinga policy may help you save on taxes whileyou protect your financial security andmaintain your independence.
Another cost-cutting alternative is alonger waiting period. Similar to thedeductible on your home or auto insurance,a waiting period is the length oftime you self-insure before the policybegins to pay. Consider how much ofyour own money you can set aside. If youcan fund even a short period on yourown, you'll reduce your overall premium.The flexibility you have in selecting awaiting period will depend on your stateof residence. Some states regulate waitingperiods and require specific lengths.
With the large number of policies onthe market, one of the most importantaspects of your decision is buying fromthe right company. Make sure your insurerhas a top rating from the major creditrating agencies (eg, A. M. Best, Standard& Poor's, Moody's, and Duff & Phelps).
Ask how long the company has beenwriting LTC insurance and examine itsclaims-paying history. You want a companywith a proven track record.
As you consider your options, rememberLTC insurance is much more thannursing home insurance. Choosing theright policy can keep you out of an institutionalsetting and in your own home ata time when you value independence andprivacy most.
Philip M. de Bruyn is executive vice president ofCapital Plan, Inc, a member of the M FinancialGroup. He welcomes questions or comments at214-360-9292 or for more information visit www.capitalplanning.com or www.mfin.com. Securitiesoffered through M Holdings Securities, Inc, a registeredbroker dealer, member NASD/SIPC.