Long Term Care

Life after 65 is not the same as it was.  For one thing, it's longer.

People are are living longer and healthier lives and can easily anticipate living 20 to 30 years past the age of 65.

Many of us may not be comfortable discussing nursing homes or assisted living,,but if we don't address these issues we'll burden our families with these decisions.

Projections by the New England Journal of Medicine say that 43% of all Americans will spend some time in a nursing home, 55 percent will stay at least one year, and 21 percent will stay at least five years.  The average stay is 2 1/2 years. 

Many people don't buy long term care insurance because they mistakenly believe federal programs like Medicaid or Medicare will pay for nursing homes.  Medicaid will pay for nursing homes only for people who have less than $2,000 in liquid assets (a house and car are exempt).

The Cost of Care

According to Genworth Financial (GE) Cost of Care Study, the average annual cost for private room in a nursing home rose 6% over the 2004 study to $69,400, while the average annual cost for a one bedroom assisted living facility increased 5% to a average annual cost of $30,300.

LTC insurance is complicated,  but it really can make our golden years comfortable and worry-free. We'll provide some of the basics and some additional research tools.

Many of the policies have the same basic features.  Here's what you should focus on:

  1. Benefit Period.  Your choices will range from two years to a lifetime, and most agents recommend going for the most time you can afford.  This decision is critical. Nearly 90 percent of all people over age 65 who enter a nursing home stay fewer than five years. The average length of time for current residents is 2 1/2 years. If you’re willing to play the odds, a four-year benefit may be a reasonable gamble.
  2. Daily Benefit  The daily benefits represent the amount that the insurer will pay to cover your daily care. On average, a nursing home costs between $150 and $200 per day, but these numbers vary depending on your location and the amenities available at the facility.
  3. Inflation Protection  This benefit keeps the policy's buying power in pace with the future cost of health care. There are 3 types of inflation protection: automatic 5% annual compounding, automatic 5% simple interest, and the option to buy more coverage at periodic intervals without reapplying.  If you are under age 65 this inflation protection will be extremely important.
  4. Flexible Coverage  Most people don't want to go to a nursing home if there are other options.  Look for a policy that covers home health aides and assisted living facilities as well as nursing homes.
  5. Elimination Period  Most policies have a deductible-some period of time, usually 30 to 90 days, you'll be required to pay for benefits before the policy kicks in. The shorter the elimination period, the more expensive the policy.  If you have modest assets, paying for 90 days of nursing home care could have a big impact on your savings.
  6. Focus on the quality of the insurer.  These are benefits you may not need for several years.  Look for a company with top credit ratings from AM Best, Standard & Poors, Moody's and Fitch.

Group Long-Term Care Coverage

Many large employers are now offering group long-term care coverage as an employee benefit.  In contrast to health insurance, most companies don't subsidize their workers premiums, so their may not be an advantage by buying a policy at work.   If you have a health problem you may have a better chance of getting coverage.

Visit our Calculators, Links and Tools page for additional help.