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Insurance of any kind is a helpful tool to transfer risk to insurance companies, or anyone else willing to assume risks that you may incur in life. One of the greatest financial risks that sit in front of us is the risk of catastrophic long-term care costs. However, with the surge of quality long-term care insurance across America, this risk can be, at least partially, mitigated.
What exactly is the Risk?
This from a United States Government sponsored website……
“You may never need long-term care. But about 19 percent of Americans aged 65 and older experience some degree of chronic physical impairment. Among those aged 85 or older, the proportion of people who are impaired and require long-term care is about 55 percent. By the year 2020, 12 million older Americans will need long-term care. Most will be cared for at home; family members and friends are the sole caregivers for 70 percent of elderly people. But a study by the U.S. Department of Health and Human Services indicates that people age 65 face at least a 40 percent lifetime risk of entering a nursing home. About 10 percent will stay there five years or longer.”
Essentially, the risk you run of not insuring you and your loved ones is this: Without long-term care insurance, your life-savings could very possibly be lost to the costs of long-term care itself. With such high odds for needing this type of care, one should at least consider all possibilities.
The cost of long-term care can be extremely expensive. Nursing homes routinely charge anywhere from $50,000 to $100,000 per year. And home-health care costs runs anywhere from $10,000 to $30,000 per year depending on the type and breadth of care needed. Given the duration of many chronic illnesses such as Alzheimer’s, arthritic diseases, and Parkinson’s disease, literally hundreds of thousands of dollars may be needed to provide the care needed.
What about Medicare?
What about the Medicare? For the most part, neither Medicare nor Medicaid insures against long-term care costs. People over 65 and a few younger people with various disabilities have health coverage through the federal Medicare program. Medicare pays only about 12% for short-term skilled nursing home care following hospitalization. Medicare will pay for some skilled at-home care, but only for short-term medical conditions and not for the ongoing assistance that many o require. Patients generally have to how improving health conditions, which is exactly what many long-term care diseases do not allow. So, no one shouldn’t count on Medicare to fund their long-term health care needs.
So what are the Costs to Insure?
Below is a chart illustrating the average premiums paid in 2007. These are average premiums based on average health conditions at the time of applying for long-term care insurance. These costs may be far more or less than you would might be asked to pay. Remember that insurance companies do their very best not to increase premium costs after applied and accepted for. So, these annual premiums generally do not change over the life of the policy-holder.
Will these Premiums Obligate the Insurer to Pay for Everything?
Not necessarily. Long-term care insurance is generally custom-tailored to the applicant’s individual needs. Often a waiting period of 30 to 90 days is built into the plan. Similar to a deductible on automobile insurance, this could be called a “time deductible.” This essentially means that the insured is obligated to pay for long-term care costs for a period of 1 to 3 months before the insurer begins to reimburse for costs.
Also, the insurer may be limited to a specific amount of costs, regardless of what actual costs are incurred by the policy holder. This limitation may be daily or monthly, depending on the policy design.
Again, there are unlimited choices available to consider when designing your long-term care insurance policy. A competent insurance agent should be able to guide you through the process.
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