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10 Quick Long-Term Care Tips

Studies have estimated that nearly two-thirds of people over age 65 will need long-term care in some form, whether it be at home, adult group care, or care in an assisted living facility or nursing home. The 2010 Genworth Cost of Care Survey estimated the median cost of care in a private room at a nursing home to be nearly $85,000 per year. These sizable figures have prompted many to investigate long-term care policies to protect their assets and ensure proper care should the need arise. Here are nine quick tips for those considering a long-term care policy.

Medicaid Only Pays For The Indigent--And Don't Count On Medicare

Medicaid only pays for the indigent, and won't help middle-class health care consumers. Some people are banking on the idea of spending down their assets to a level where they would be eligible for Medicaid. This is not a sound plan as there are significant penalty periods and sanctions in place that make this strategy very arduous. Medicare is designed to only provide care for a very short term; its intended design is to pay for care relating to a short recovery period for people stricken by illness or injury and is not a long-term solution.

Long-Term-Care Insurance Protects Retirement Assets

With per-person figures for one year of care approaching six-figures, even those with sizable assets are in danger of wiping our their entire nest egg. For many, long-term-care policies provide peace of mind in knowing that their hard-earned savings will go towards their intended purposes rather than for care.

Buy It Sooner, Rather Than Later

Today, the average age of a long-term-care insurance buyer is 56. Fifteen years ago, the average age of the buyer was 69. The younger you are when you apply for a policy, the more likely it is you will be approved--57% of those who apply for long-term-care insurance at age 80 or older are declined by insurers, while only 11% of those who apply between the ages of 50 and 59 are turned down. Most experts agree that one should start thinking about long-term-care insurance in your early 50’s.

Pools of Money

Think of a long-term-care policy as buying a pool of money for future use. For example, if you buy a policy that pays benefits for 10 years (or total benefits of $600,000), but in the first year, you only use $30,000 in benefits, you will have $570,000 left to use. If, after 10 years, you haven't used all of the money available to you, the policy's life will be extended until the pool of money available to you is gone.

Plan for Inflation

If the daily benefit is $200 and you opt for the 5% inflation protection, the benefit in 15 years will be $400 and the daily benefit in 30 years will be $800. When thinking about purchasing these policies it is highly advised that you select one that offers inflation protection.

Get A Comprehensive Plan That Is Flexible

Depending on your level of need, you may be able to receive care while in the comfort of your own home. A comprehensive policy pays for care at a facility but also offers the option of receiving care in your own home or community. Make sure any policy you are considering affords payment for care regardless of the setting you are in

Paying For It

Consider getting a "10 pay" option. It costs more in the short term, but may be less expensive over the long run. This option requires premiums be paid for 10 years, after which you will have a paid-up policy which protects you from rate increases that might occur down the road (although you are exposed to rate increases during the 10-year payment period).

Getting Paid For Using It

When you buy a long-term-care policy, you will choose between a reimbursement and an indemnity option. The reimbursement option is for actual expenses up to a daily limit. The indemnity option, which is more expensive, pays a daily benefit of a specific amount, regardless of how much you spend. 

Uncle Sam Will Reward You For Buying It

There are some tax incentives for those who buy long-term-care insurance. No taxes are owed on benefits paid out, and there are 35 states that offer a tax credit to long-term-care policyholders. Maryland gives a $500.00 tax credit for each individual the first year.

Think beyond yourself

Consider the impact on those around you in the event you were no longer able to care for yourself. Some people are very comfortable with the idea of their family paying for care or personally administering the care they need. Others want to ensure that those closest to them are never put in the role of caregiver or financier. There is no right or wrong answer, but you should give conscious thought to what life will be like in the event that you lose your independence. For those looking to help ensure they never need to rely on their family, there is no better tool than a long-term care policy.


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