Is Long-Term Care Insurance the Right Choice?


In a June e-newsletter from SullivanKreiss Financial , financial consultantSiobhan Kelleher has some good benefit planning advice concerning long-term care insurance. Both the planners of benefit programs and the potential recipients of these benefits would do well to consider these issues.

“A significant consideration in retirement planning is how to pay for long-term nursing care, should your health require it,” writes Kelleher. “According to research by the MetLife Mature Market Institute, once you reach age 65, you have a 50% chance of spending time in a nursing home and a 60% chance of needing some type of care at home or in a facility.”

This issue is the biggest element of risk in many people's post-retirement financial strategy, Kelleher points out, but unfortunately, the high cost of skilled care can wreak havoc with a financial plan.

She goes on to explain that long-term care insurance is a possible solution, but that it might not be the right answer for everyone.

“Long-term care insurance, offered by private companies, covers all, or a portion of, the cost of skilled nursing care facilities and in-home assistance,” writes Kelleher. “It's important to note that you do not have to enter a nursing home in order to receive benefits. These policies often cover, if necessary, a portion of housekeeping costs and pay benefits to those needing help to feed and clothe themselves or suffering from cognitive impairment.”

She cautions that policies for long-term care insurance vary widely. It’s important to choose a stable and reliable firm. Two features that Kelleher considers critical to any basic long-term care insurance policy are a nonforfeiture provision and inflation protection.

“These both provide a measure of protection against rising healthcare costs and rising premium rates in the future,” she says. “The nonforfeiture option provides a reduced policy in case you cancel the policy (rather than no policy at all if you cancel a policy without this provision), and inflation protection provides a built-in increase in benefit dollar amounts at a set percentage each year.”

Kelleher lists some common myths that individuals have about long-term care—and explains why they are misconceptions:

The government or health insurance will cover me. Medicare and health insurance are not designed, or sufficient, for long-term needs.

I cannot afford long-term care insurance. Costs for long-term care could easily exceed $96,000 per year, versus yearly insurance premiums of $1,000-$5,000 for common policies.

It won't happen to me, and besides, I'm too young. Disabling illness or injury can happen to anyone at any age, and it's less expensive to get coverage when you are younger and healthier.

My family will take care of me. Family care has changed drastically over the years. Time, distance and the necessity of both spouses working can make it much more difficult to provide care.

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