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,"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. "For a lot of policies now, the waiting period doesn't apply to home health care," Mogil notes. " It only applies if you go into a facility." There also are 30- and 90-day options that would, respectively, increase or decrease premiums. This is also applies to care-per-day amounts and coverage years as well. For example, the same woman would pay roughly $1700 a year for a policy covering $150 of care per day for a maximum of five years, assuming a 30 day elimination period.*
Mogil also says that married couples taking out a similar policy to that of the single woman would receive about a 15 percent discount on each of their premiums.
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 insurance isn't easy. Think about how much of a role, if any, you foresee family and friends playing when you need care, or how much of the cost of care that you're willing to pay out of your own pocket. 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 trying to buy a policy in your 70s or later 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.
Moreover, Mogil counsels clients opting in favor of long-term care insurance to look for reputable companies (i.e. those with high ratings for financial strength and stability). Afterall, you want to feel confident that claims will be paid when the time comes, especially says Mogil, "if we're all going to be applying for benefits at the same time." With the aging boomers on the horizon, that time will soon be at hand.
*U.S. Department of Health and Human Services, National Clearinghouse for Long-Term Care Information
Jeff Iorio is a journalist and editor, based in the New York Tri-State.