Consider your genetics, what diseases might you be at risk for? If the family has a history of long term debilitating diseases, get extended coverage. This is always a calculated risk so gather and consider all the information about yourself and family to help make the best possible call.
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Over 40% of the seniors who turn 65 each year will spend some time in a nursing home. (Journal of Financial Services Professionals, Jan. 01)
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About 1.5 million americans receive nursing home care each year.
About 8 million receive home care.
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Total expenditures only increased 340% during that same period.
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Over 30% of individuals over age 85 received home care in 1996.
Nearly one in six over age 85 was in a nursing home in 1995. (JFSP, Sept.00)
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In 2000 almost 10 million people received long term care services and that number is expected to rise to 24 million by 2060. (JFSP, Sept. 01)
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According to the General Accounting Office Medicaid paid for 42% of LTC expenses in the U.S. last year. Individuals and their families paid for another 40% of the 115 billion dollar cost!
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From 1985 to 1995, nursing home growth (buildings) rose by modest 3% while the number of seniors grew by 18%. (JFSP, Jan. 99)
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There is a one in 80 chance of using your homeowner's insurance and a one 40 chance
of using your automobile insurance, but about a 60% chance that you are going to be in a nursing home after age 65. (Nation Underwriter, May 99)
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40% of Americans receiving LTC are under the age of 65 and almost one third of the
stroke victims in the U.S. last year were under 65. (Nation Underwriter, Dec 00)
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43% of people aged 65 and above will spend some time in a nursing home before they die.
(New England Journal of Medicine)
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OUR THOUGHTS ON THIS MATTER
You may want to play the odds as to when to start protection or consider whether or not you should have this coverage. A $150 a day policy for four years with inflation protection should be costing about $1,200 a year for 50 year olds coverage; at 65 $2,400, and $7,600 at 79, if you can still qualify for coverage. Unless you are in decent health you may not be insurable. (AHIP figures)
How might you play this part of the money game? If your family history is clear of disabilities, strokes and dementia, statistics are in your favor. If you don't have a lot of assets to protect or have so many that you can afford the care, don't buy it. If you are on the short end of the financial stick, premiums may be too much and your assets would be exhausted anyway. Some sources consider the value of assets that should be protected to be $75,000 and above. Others say $200,000. We agree with the $200,000 figure. If you are between $200,000 and $2,000,000, you should seriously consider long term care with a protection period of 3-4 years. At least, that is our view of the world.
What should you do if you are on the low end of this financial game. Take your chances and take some protective steps. If you should be admitted into an extended care facility, Medicaid will step in after essentially all of your assets are exhausted. In order to avoid the loss of personal assets, people often move title to their home to their children. This must be done at least 5 years before admittance. We feel there are better ways to deal with the issue of family assets being lost to long term care and medical expenses.
We recommend you consider a Limited Family Partnership with mom and pop as general partners, leaving them to be in charge with the kids in a limited partner status. This can move 98% of ownership to the kids but with no authority. (We don't want a law suit against one of the kids risking the folk's house.) Bank accounts and brokerage accounts can protected in a similar manner. Retirement plans also are now afforded some protection, which came about in March of 2005 through a U.S. Supreme Court ruling. This plan of protection must be in place before a risk threat manifests itself.
It is possible also, to gift money out of your accounts even after you are in a care center and paying for your care. This can save some of the wealth for your family. We are planning this as a newsletter topic in the near future as it is complex and has restrictions. In the meantime, review our Asset Protection topic. We suggest going very slowly when it comes to moving assets to the children.
Your insurance provider check list:
1. What is the daily benefit amount compared to the daily charges?
2. Is the policy guaranteed to be renewable?
3. Is there a prior hospitalization requirement before coverage begins?
4. Do restrictions determine where care is provided?
5. What levels of care does the policy cover?
6. Are pre-existing conditions excluded? And, if so, under what conditions.
7. Is there a deductible and how long is the waiting period?
8. What is the period limit of confinement?
9. What about coverage for Alzheimer's patients?
10. Is home care provided if the patient returns home?
11. What is the rating of the insurance company?
Disability Insurance Also marketed as 'Income Protection'
It is considered to be a hard sell by the industry, but you should consider it. At least for a partial coverage policy. Your biggest asset is your ability to earn a living, and you certainly insure other assets of substantial value.
This kind of insurance is relatively expensive and benefits have been scaled back in recent years. They will normally limit coverage to 60% of your income and may have some other restrictions. This coverage is much easier for a white collar worker to get than blue collar. It normally terminates at age 65-67.
How much might an insurance company be required to pay out? A $300,000 income at age 45 would essentially be protecting 20 years of earnings amounting to $3.6 million at 60% coverage. That is why the cost is high.
What are some statistics? About one in five Americans have some type of disability, and one in ten have a sever disability requiring the assistance of another person or assistive device to perform basic activities, according to 1997 U.S. Census data. A 35 year old worker is 5 times more likely to be disabled for 3 months than to die before retirement.
You may have employer sponsored disability insurance, but check the fine print. This coverage often comes with limits well below 60% and it will be considered taxable income to you. Consider a supplemental policy which can be quite affordable.
Insurance
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