LTC INSURANCE: A REALITY CHECK
When it comes to long-term care insurance have you properly examined your needs?
BY:JEFF IORIO
Time changes all things, and that includes your insurance needs. So, as a member of the Baby Boom that’s morphing into the Senior Boom, consider the effects of age, health and life situations, knowing it’s time to review what policies you have and to anticipate what policies you’ll want as you approach retirement.
“Boomers are in a unique situation,” says Jeff Mogil, CEO of the Mogil Organization, an insurance-brokerage firm in New York City. “We’re the first generation looking toward purchasing long-term care not only for ourselves, but for our parents, who are now living longer than ever and having their assets depleted.”
Mogil’s statements are backed by a U.S. Department of Health and Human Services study that found 40 percent of those who reach age 65 will require nursing-home care. Medicare provides limited coverage for care that can easily cost $300 per day. And while life-expectancy age has increased, the odds of developing a life-altering condition has also risen, increasing the possible need for long-term care.
“The fifties are the time to start looking at long-term care and to think about your plan for the next ten to twenty years,” adds Mogil, since those between 50 and 59 will find the most reasonable premiums for LTC insurance. A single, 56-year-old woman in good health, he explains, would pay approximately $3,500 a year for a policy covering $250 of care per day (budgeting for five-percent inflation) for a maximum of 10 years. That’s assuming a 60-day waiting period before coverage begins. There also are 30- and 90-day options that would, respectively, increase or decrease premiums. “For a lot of policies now, the waiting period doesn’t apply to home health care,” he notes. “It only applies if you go into a facility.” He also says that married couples taking out a similar policy to that of the single woman would receive about a 15 percent discount.
Coverage becomes costlier if there’s an existing illness. A person with diabetes, for example, should expect to pay from 25 to 50 percent more in premiums than a comparably aged person in good health.
Deciding to purchase LTC isn’t easy. Consider your family’s history regarding longevity and chronic illness. Age matters, too; the younger you start, the lower the premium. But don’t start too young since you could end up paying in more than you’ll receive in benefits. And starting at say, 75 to 85, could prove cost prohibitive. You must consider your overall financial picture. Experts caution against taking out a policy with annual premium costs greater than five percent of your current annual income.
Mogil counsels clients opting in favor of long-term care insurance to look for reputable companies licensed in the state where the policy is purchased and protected by the state insurance department to protect benefit payments in case an insurer goes bankrupt. “I’m a little concerned, both as someone who sells it and has purchased it, about whether the money’s going to be there if we’re all going to be applying for benefits at the same time,” he explains.
Also, because some policies cover you only in the state in which the policy was purchased, he recommends you ask yourself where you’ll be living when you retire before committing to an LTC policy.