More people are living longer and many will likely need long
term care in their latter years. Currently, Medicare and Medicaid do not cover
a majority of these services. Instead, individuals are responsible for
acquiring and paying for them. One solution is to purchase a long term care
(LTC) insurance (LTCI) policy. Ideally, your LTCI would cover all of your
services for as long as you need them. However, policies vary widely in regards
to coverage, costs and accessibility. As the cost and demand for these services
continues to grow, planning for cost of care requires an informed and strategic
approach.
Determining the cost of your LTC is dependent upon several
variables. Important factors include the age at which you buy your policy, life
expectancy, where you plan on retiring, what services you may need, how long
you will need care, and the rate of inflation. Systematically finding this
information on your own can be overwhelming. Fortunately, HealthView Services
offers a free LTC calculator that gives you an estimation of what your costs
would be now and later based on your personal criteria. In one scenario, a 65
year old male who can likely expect to live to 80 wants to retire in Raleigh,
North Carolina in an assisted living community. His LTC costs for 2 years in
2010 would be $80,819 whereas in 2030 they would be $318,641. This estimate can
then be used as a starting point in choosing a policy.
When looking at individual policies there are several
key items that will affect your benefits. Pay attention to whether the daily benefit is a fixed dollar amount or is
adjusted to take the rate of inflation into account. The daily benefit is the
amount you policy pays out on a daily basis. If you take a policy with a set
dollar amount it will likely not be able to cover the cost of your services in
the future and you will have to pay the difference out of pocket. You should
also find out what the elimination period is. Also called the waiting period or
the deductible period, this is the length of time that must elapse from the
time a service is requested to the time at which your policy begins payment.
This interim period can last from 0 to over 100 days, during which time you
must pay for the service out of pocket. Another important policy feature is the
benefit period. This is the length of time you can receive your benefits and it
can last anywhere from 2 years to the rest of your life. Lastly, find out if a
policy covers nursing homes, assisted living and/or home care. Some plans may only
cover nursing homes or some combination of the three. Make sure your policy
facilitates the type of lifestyle you envision for yourself.
Finding the right LTCI policy can be arduous process.
Fortunately, there are numerous sources that provide free information industry
specific information. An informed decision is always the best one and
the key to finding the best policy is doing your research.
A more in depth version of this article can be found in the current edition of Retirement Weekly, a MarketWatch publication.
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