Another thought provoking article by Ernie McDaniel
I have received a number of inquiries on this subject since I mentioned it a few weeks ago in an article about controlling insurance costs in general. Before I answer, let me make sure the reader knows what long-term care insurance is and is not.
This coverage is intended to provide care for a person when he is no longer able to take care of himself. Whether and to what extent a benefit will be paid is determined by his ability to perform independently certain basic daily maintenance activities; including, for example, dressing. It is not health insurance in the usual sense, although it does fall under that regulatory umbrella. It is not covered by Medicare or Medicare supplement policies. For the poor, it is covered by Medicaid, but with limitations as to the level of care.
Imagining yourself as dependent upon others for the most basic care is not a vision of the future anyone finds pleasant, not any more than imagining yourself twisted and torn in a car wreck. Yet, people do have car insurance and health insurance to address the expense of this potential healthcare catastrophe; so should they also consider insurance coverage for the potential long-term care financial requirement. The local cost for basic facility care is currently about $4200 per month.
Some folks are wealthy enough that they can self-insure. Others have less wealth but still enough that they feel it appropriate to purchase coverage that is limited in amount and length of benefits. Others get full coverage for greater cost but also for greater peace of mind. Of course, some people choose to have no coverage, to risk the depletion of their life savings, possibly leaving little to their heirs. These decisions are very personal ones.
So far, the implication has been that only a person facing old age might require long-term care, but certainly young accident victims (for example) might as well. Generally speaking, it is in middle age that many people first seriously consider purchase of long-term care insurance. Again, it can certainly be purchased earlier in life and at lower cost. Beginning premiums do increase with age, so there is that advantage to earlier purchase; although, purchase at a younger age certainly may mean paying premium for a longer period of time.
Personally, I purchased mine at age 54. Many people, though, wait until they are in or near retirement -- perhaps in their sixties -- and then endeavor to make the premiums a part of their retirement budget.
Once purchased, premiums are not guaranteed but may not be increased except for an entire class of premium payers; that is, one can't be singled out individually for a premium increase. As I said earlier though, premiums are virtually guaranteed to increase for every year one waits to begin a policy. Of course, there is also a risk that one might wait until health issues (diabetes and stroke are common ones) cause there to be no coverage available at any price – or at best, available only at much greater than ordinary premium cost.
Coverage may be purchased for facility care only, or it may include home health care and/or assisted living care. Coverage preferences, of course, influence plan selection and costs.
Ernie McDaniel is a Chartered Financial Consultant and President of McDaniel Financial. He can be reached at 318-798-9022.
