What is Long-Term Care Insurance?

You may or may not have done a lot of planning for your retirement — some people have had IRAs for ages, while others don’t even know how much they need to save. Either way, there’s one element of planning for the future that very few people are taking into account right now, and that’s the potential need for long term care.

What is long term care? It is health care that goes beyond immediate life-saving services. Traditional nursing home care is the most familiar issue, but the field also addresses the need for in-home medical care or supervision, rehabilitation from accidents, physical therapy, custodial care (assistance with daily activities), pain management, and more.

Why does it matter to you?

It’s important to think about long term care, because if you have planned for an active retirement in good health, you may find all your good intentions undone by one accident or long-term illness.

According to a 2002 article in Best’s Review (“Raising America’s LTC IQ”), some 40% of Americans will need some form of nursing home care during their lifetime, the cost of which is currently upwards of $50,000 a year and growing rapidly. The percentage is even higher if you include long term care outside of nursing homes. In June 2004, Kiplinger’s stated that, projecting a continued 5% annual increase in medical costs, they expect the cost of 24-hour in-home skilled care will be $175,000 a year by 2024.

Coverage of long term care expenses by traditional health care plans, including Medicare, is spotty and confusing, and currently subject to changes every year as the industry struggles to contain the costs of caring for an aging population. In no case do current medical plans cover more than 100 days of care; many cover much less.

If you don’t count these potential expenses for yourself or your spouse into your retirement savings plans, you could find your entire future sucked into a bottomless pit of medical expenses.

How can you protect yourself?

There are several companies now offering some form of Long Term Care Insurance (LTCi). Currently six companies represent over 80% of the market: Genworth, John Hancock, Banker’s Life, MetLife & Aetna, and UNUM/Provident.

The premiums may feel like a burden, on top of all the other types of insurance we buy, but the protection these policies offer can be crucial - the chances of needing long term care are high, the costs are significant, and these costs can occur at a time in your life when you have no chance to recover and rebuild your savings.

It’s also important to remember that qualifying for a policy while you are still healthy can save you a good amount of money - an existing long-term illness can increase your premiums or even make you uninsurable.

Not just for you.

An important note for the “sandwich generation” who are likely to be taking care of both their children and their parents in the future - there are increasing numbers of “Filial Responsibility” laws on the books, which can force adult children to pay for their parents’ care. Nursing homes who provide care which is not covered by existing health insurance are gaining the ability to sue family members to recover their costs.

If your parents are not providing long-term care insurance for themselves, you’ll want to talk to them and your siblings about getting a plan in place as soon as possible.

Sources: http://www.longtermcarelink.net