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Article Title: Does Long Term Care Insurance Make Sense for You?

<p>Does Long Term Care Insurance Make Sense for You?</p> <p>When most people imagine their retirement, they picture walking on a beach, dropping a fishing line at a quiet spot, traveling to faraway places, or enjoying a hobby they never had time to pursue. Very few imagine spending their “golden years” in a nursing home or assisted living facility. Experts who study elderly living say that people who live to be sixty-five years old have a seven-in-ten chance of requiring long-term care at some point in their lives. </p> <p><a href="http://www.LongTermCareWiz.com/" target="_blank">Long term care</a> is not affordable for most people now and it will become more expensive in the years ahead. A study by the MetLife Mature Market Institute reports that the average annual cost of a private room in a nursing home is now $77,745. The average stay, the study says, is 876 days, or 2.4 years. The total cost of such a stay would be $186,588.</p> <p>People have three ways to pay for long-term care: 1) They can use their personal savings; 2) They can apply for coverage through Medicaid, the healthcare program provided to low-income Americans by the federal government; or 3) They activate their <a href="http://www.LongTermCareWiz.com/" target="_blank">long-term care insurance</a> policy. Since the vast majority of people do not have $186,000 in savings—or even $77,000, for that matter—most people use their long term care insurance or, if they do not have insurance, they turn to Medicaid.</p> <p>Qualifying for Medicaid is not simple. The application will be denied if the applicant has substantial assets, such as stocks, bonds, a retirement account, an annuity, or cash. These assets must be spent on the care (not given away) before Medicaid will begin to pay benefits. Medicaid does not count a person’s home as an asset, provided his or her spouse or a dependant is living in it, although it does count home equity above $750,000. To prevent people from giving their homes away to a relative or friend simply to qualify for Medicaid, Congress created a five-year “look back” period for transfers of property prior to applying for Medicaid.</p> <p>By far the best way to pay for long-term care is with insurance. To insure the lowest premiums, the consumer should take out the policy as soon as possible. Anyone who waits to buy insurance until they need the care will not be insurable, of course. The sooner a person takes out the policy, the less they pay. A fifty-year-old will pay roughly $1000 a year for a policy that would cover four years of long term care that costs of $150 a day. By age sixty-five, a person will pay $2200 a year. By age eighty, the cost skyrockets to $7500 a year.</p> <p>One way to reduce the premium amount is to decrease the daily rate the insurance covers. According to the MetLife study, staying in an assisted living facility costs $35,628 a year, approximately half of what it costs to stay in a nursing home. If assisted living will meet the needs of the insured, the cost of care decreases dramatically, from $213 a day to only $97 a day. Decreasing the daily rate covered by the policy will cut the premiums dramatically.</p> <p>Another way to lower premiums is to limit the period the policy will cover. Since the average stay in a facility is just 2.4 years, the consumer could cover this amount of time and feel reasonably confident that the coverage will be sufficient. The risk, of course, is that with increasing life spans, the insured could easily outlive the coverage, wiping out his or her personal savings in a matter of months.</p> <p>A smart way to reduce premiums is to assume more of the insurer’s risk by increasing the waiting period before benefits begin, known as the elimination period. Simply delaying the benefits for just 100 days lowers premiums significantly. The insured would be responsible for paying $15,000 worth of care out of pocket, but this is a relatively small amount compared to the cost of the extra months or years of care that would be needed the event that he or she outlives the coverage period. The cost of an elimination period is a finite amount, but the cost of outliving the coverage is not. It is better to commit to and prepare for paying a large amount that is known than to hope against needing—and live in fear of paying—a larger amount that is unknowable.</p>

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