Securing the Future - Millions Are Turning to Long-term Care Insurance

May 11, 2007

As people live longer and the cost of nursing home care increases, insurance agents and estate planners are sounding the call that, for many, purchasing long-term care insurance is a better financial bet than relying on Medicaid -- while also providing the flexibility of being cared for at home.

Increasingly, Americans nearing retirement age are heeding the advice. It happens all the time: after spending a lifetime amassing some savings and perhaps a small inheritance for the next generation, a retired man or woman suddenly suffers a downturn in health that requires admission to a nursing home.

Then they find out what it costs: around $88,000 per year, on average, or about $7,500 a month. Without any sort of long-term care insurance, there are only two options: pay out of pocket or enter the state Medicaid program, which first requires a spend-down of most savings.

Either way, it almost always means saying goodbye to that nest egg -- and that money for the kids.

As the average age of the population in Massachusetts continues to rise, and the Baby Boom generation starts to drift into the retirement years en masse, insurance agents are seeing a growing understanding of the importance of long-term care insurance. But only to a point.

"All the awareness in the world would not be enough to get everyone to pay attention to this," said Sandra Grant, a producer with Novak Charter Oak Financial Group in Springfield. "Everyone over the age of 40 needs to purchase long-term care insurance and integrate it into their retirement plan."

The basic, minimum policy -- typically providing $125 of nursing home coverage per day -- is sufficient to ensure at least some long-term care, but it's not something that can be easily added to a retirement plan late in life. At a certain age and quality of health, in fact, it's not available at all, which means people need to start considering their options long before they retire, Grant said.

"It's really about your health at the time of application," she explained. "You can purchase more at a younger age because it's so much more affordable, and you can set it up to pay more over a shorter period. For someone who purchases it in their 60s, it might be a lifetime payment plan, but in your 40s and 50s, you might be working and be in a position to afford a higher insurance premium, so it can be paid in full by age 65.

Purchasing it at a younger age does give you a lot more flexibility." In this issue, BusinessWest examines why public-health plans like Medicaid carry their own financial pitfalls, and why long-term care insurance is becoming more accepted as a way to achieve a certain quality of care without sacrificing a lifetime of savings. ...

You may read more at the link below.

by: Joseph Bednar

BusinessWest
March 5, 2006

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