Yes: Don't Just Hope for the Best
http://www.mintcofinancial.com/quotes/long-term-care-insurance-quote/
By Mark Meiners
Being financially ready for the possibility that you will require
long-term care is an important part of retirement planning. But too many
people are still preparing merely by hoping for the best.
For anyone 65 and older, the odds are not in your favor. Statistics
show 70% of those who reach 65 will need long-term care. With long-term
care costing as much as $250 a day, it doesn't take long to completely
deplete a lifetime of savings—even if you're "lucky" enough to only need
it for a relatively short period of time.
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Madden Meiners
MARK MEINERS: 'The biggest misconception is that Medicare covers long-term care. It does not.'
For those who buy and keep their policy
it is a no-regret proposition. No one who has paid premiums and
receives their benefits from the policy regrets having paid those
premiums. And no one ever regrets being fortunate enough to never need
those benefits.
The sad fact, though, is that only seven million to eight million
people have bought the insurance so far. The market should be at least
twice that size by now. Certain misconceptions, and some wishful
thinking, are holding it back.
Some Misconceptions
The biggest misconception is that Medicare covers long-term care. It
does not. Medicaid, meanwhile, pays for various kinds and amounts of
long-term-care services and support—for the poor. But many states are
cutting back on Medicaid benefits, and access to good care is always
uncertain.
That isn't to say long-term-care insurance is right for everyone.
It's not. The wealthy can be reasonably sure their savings will be
enough to pay directly for long-term care, whatever its duration. And
despite concerns about quality, Medicaid is there for the poor.
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The Wall Street Journal
But what about consumers with midlevel
savings—in other words, most people? These consumers need long-term-care
insurance the most. They tend to have too little savings to pay for
even a couple of years of care without impoverishing themselves and
their families, and too much to qualify for Medicaid.
Critics of long-term-care insurance argue that many who need
long-term care use it for less than 90 days, and that most policies have
a 90-day deductible, meaning most owners of long-term care insurance
will receive no benefits. But who wants to play those odds, hoping
they'll be one of the people who only need such care for less than 90
days? And the fact is that most people who need long-term care need it
for at least a year or two.
The important thing to understand is that there are a wide range of
policies offering different degrees of security, but all preferable to
taking the chance of being financially decimated. According to estimates
done by the American Association for Long-Term Care Insurance, a
typical couple buying a shared policy providing immediate benefits worth
$328,500 at age 55 pays an annual premium averaging $2,700. By age 80
their joint benefit has grown to $708,000 with the built-in inflation
protection. Alternatively, a typical couple buying a shared policy with
$219,000 of coverage could reduce their premium by about 20% to 25%.
That's a viable option for those who are worried about this risk. If
more coverage is affordable, buy more coverage. But some is better than
none.
In theory, it's true, if a person invested $3,500 a year instead of
using it to pay insurance premiums, the investment might grow enough to
cover any eventual long-term-care bill. But as nice as it sounds, most
people simply won't set aside additional savings for long-term-care
needs. Moreover, savings of $3,500—should the need for care come sooner
than expected—will pay for only $3,500 of care.
Partnership Policies
In a worst-case scenario, a person in nursing care might outlive by
many years the coverage that they purchased, wiping out his or her
savings. People especially concerned about this might consider so-called
Partnership Policies, developed by private insurers and state
governments and offered in 40 states. These plans let people qualify for
Medicaid's long-term-care benefits while they still have a good amount
of savings to spend on other things or leave for their family.
(Normally, a person can have no more than $2,000 in savings for Medicaid
to pay their long-term-care costs.)
Partnership plans that offer to protect savings of up to $100,000,
for example, will pay up to $100,000 in benefits. Then, if the purchaser
has savings of more than $100,000, he or she becomes responsible for
their long-term-care costs until their savings are reduced to $100,000.
At that point, Medicaid will take over the expenses.
