Editor's note: November is Long-Term Care Awareness Month. This is a guest post from industry professional and Eagan resident Mike Westling.
How would you pay for long-term care services such as a visiting nurse, assisted living, therapy or a personal care aid if you needed them? Could you easily pull $200,000 from your retirement nest egg to pay for three-years in a nursing home?
According to the 2011 Genworth Cost of Care Survey one year in a nursing home can cost more than $70,445 today, and that cost continues to rise. Long-term care (LTC) insurance is the one financial tool that can help you prepare for these costs in the future. With this protection, you will be able to maintain more independence should you need long-term care. You may be able to stay in your home longer, and you’ll have more choices about your long-term care services and providers in the future. That’s why it is critical to investigate long-term care insurance to determine if it should be a part of your overall financial strategy.
While most consumers know something about long-term care and can access information about the topic, several misconceptions surrounding long-term care insurance still persist. Additionally, there are a number of tips you should think about when buying the product. Let’s look at two of the most common fallacies about long-term care insurance and two helpful tips to consider when putting together your long-term care plan.
One pervasive misconception is that other insurance and government programs will cover long-term care costs. Long-term care usually involves non-medical assistance with basic daily activities like dressing, bathing, or using the toilet. In fact, many long-term care services that help with these tasks are not typically covered by other kinds of insurance, including health and disability insurance. Only long-term care insurance policies help cover the day-to-day assistance you need when you have a chronic illness, disability, or cognitive impairment and need help with activities of daily living such as eating, bathing, or toileting.
As for government programs, Medicare pays only for short periods of care and Medicaid covers only the very poor -- those whose assets are at or below state-required levels. It does cover care received in nursing home, but a new law passed in February 2006 makes it harder to qualify for government-paid nursing home care.
Another common misunderstanding is that many people think they can’t afford long-term care insurance. In reality, coverage is more reasonably priced than they think and can certainly fit within a budget. Remember, the younger and healthier you are when you apply, the lower your premium will typically be. So if you plan to buy long-term care insurance, it makes sense to buy it sooner than later. The key is to develop a long-term care insurance plan that fits your budget and your needs.
When you are ready to buy long-term care insurance, it’s very important to have inflation protection, especially if you are buying a policy in your 40s, 50s, or 60s. After all, if you buy a specified daily or monthly benefit based on today’s provider costs, that benefit is not going to keep up with rising costs over the 10, 20 or even 30 years that may pass before you need the benefits --- unless you have inflation protection.
Most long-term care insurance policies have different kinds of inflation protection options, and some can be very expensive. The key is to select the option that gives you an appropriate level of protection at the best price. Policies may also offer the ability to purchase additional coverage over time without medical screening which may be another way to allow your policy to keep up with inflation.
So is planning for long-term care insurance worth it? Few people regret purchasing car or home insurance when an accident takes place. The coverage earned is far greater than the annual premiums paid, especially when you consider the alternative: paying for a new car or a new home out-of-pocket. The same is true of long-term care insurance. The benefits paid out under a LTC insurance policy for one year alone can often exceed the cumulative premiums you pay into the policy over many years. More important, long-term care insurance helps to protect your retirement savings and allows you more independence and choice in how and where you receive your long-term care services when you need them.
About the Author: Mike Westling joined Newman Long Term Care in 2006. He began his insurance career with GE Financial in 2003 as a Long Term Care Insurance Representative. Prior to that, he was a Senior Housing Marketing Consultant helping families transition to assisted living and independent living communities.
Westling attended the University of Minnesota where he pursued a degree in business administration. He is a member of the National Association of Insurance and Financial Advisors (NAIFA) and the Financial Planning Association (FPA) and has earned the Certified in Long-Term Care (CLTC) professional designation. He lives with his wife and two teenage children in Eagan, Minnesota.