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Could it happen to me?
According to statistics from
the Health Insurance Association of America (HIAA), some 7 million
Americans age 65 or over required some form of long-term care in 1999,
either due to disability or chronic illness. What's more, half of that
number was for people under age 65. Chances are you or someone you know
was among them, or that you are a caregiver for one of the 70 percent who
received assistance solely from a family member or friend.
With nursing home costs now averaging $46,000 and over $100,000 annually
in high cost areas according to HIAA, individuals may quickly run through
both their income and their savings if they require an extended nursing
home stay.
Your Options
Medicare begins to provide
benefits at age 65, but will not subsidize long-term care beyond one
hundred days. If your annual income meets certain government tests and you
have very little savings, you may qualify for Medicaid, which will cover
most nursing home expenses.
For everyone else, the widespread need for long-term care in nursing homes
and group residences has spurred many insurance companies to begin
offering a relatively new type of coverage:
Long term care insurance. In practice, however, buying long-term care
insurance is often not high on anyone's list of priorities. Unfortunately,
the worst time to start shopping for it is when you need it. By then,
either you or members of your family may not qualify; or even if you do,
the premiums can be prohibitive. However, more and more people are now
becoming aware of the critical need for long term care insurance.
Long-term care encompasses
three distinct types of care:
• Skilled care, which is 24-hour-a-day care by a
registered nurse under a doctor's supervision;
• Intermediate care, which is occasional nursing and
rehabilitative care under the supervision of medical personnel; and
• Custodial care or help with personal needs such as
cooking and bathing. In-home assistance with daily activities is
considered long-term care and is becoming increasingly prevalent.
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Buyer Beware
Long-term care insurance pays a
predetermined daily benefit. As an example, $150 per day is the same as
$4,500 per month or $54,000 per year. The cost of a policy varies with the
daily benefit amount you choose and the number of years a policy is to pay
benefits. Your age and other factors will also have a bearing on cost.
You should consider a policy that has an adequate daily benefit and plan
maximum. A well-designed plan will pay most or all of the average daily
room rate of a nursing home in an individual's geographic area. Also, to
allow for future increases in nursing home costs, you should consider an
inflation protection option.
When analyzing a particular insurance plan, check that all levels of care,
not just skilled nursing care, are covered. It is preferable to have home
health care covered at the same level as nursing care, as most people
prefer to remain in their own home whenever possible.
The Good News
There is now favorable tax
treatment available for long-term care premiums. Employers may also pick
and choose select employees for coverage without violating any
nondiscrimination rules under the Internal Revenue Code. Thus, long-term
care insurance provides an employer the unique opportunity to offer a
valuable employee benefit to select employees with favorable tax
advantages for the business and the employee.
Peace of Mind
If you have substantial income
and assets worth protecting, you and your family may be well served by
purchasing long-term care insurance coverage. Otherwise, you will be fully
liable for the costs of your long-term care and may be faced with
depleting not only your retirement income, but also your life savings.
Long-term care insurance is the least expensive way to provide future
funds for care and protect your assets from rapid depletion.
About the author: Joel Konikow is a
principal of the insurance firm Konikow Associates Incorporated of
Englewood Cliffs. Since 1963 Konikow Associates bas provided guidance in
the areas of personal and corporate insurance as well as employee
benefits. Konikow Associates also represents ATLA-NJ with endorsed
insurance products for ATLA-NJ members. For more information call 201.
750.0100 or stop by Booths 13 and 14 at the Boardwalk Seminar 2001 for an
onsite quote.
Personal & Corporate Insurance • Employee Benefits • Retirement
Planning |
