The game may still be “life,” but many of the financial rules have changed. For one, the retirement planning equation is now the lifetime planning equation. That’s because costs, including those associated with long term care, may outpace the average retirement plan and create a whirlpool that sucks up hard-earned retirement assets. In years past, Medicaid provided a potential fallback option for covering long term care costs, but recent federal legislation has tightened qualifications and applicants are getting a closer look.
Many people are being pulled into this financial quicksand because they simply weren’t aware of two things: the true cost of long term care services and the fact that most long term care services aren’t covered by other health insurance plans.
Today, long term care is being delivered in many places other than nursing homes. Most people choose to receive care in their own homes, but assisted living facilities and adult day care facilities are also options. The services offered include help with functions associated with everyday living, such as showering, dressing and cooking meals. This care also includes the type of supervision an individual with cognitive impairment, such as that caused by Alzheimer’s disease, requires. Long term care can be provided over a period of months or years.
Naturally, the costs for long term care depend on the form of care chosen and level required. For example, the average annual cost for a private room in a nursing home is approximately $75,190, whereas the average private-pay rate for an individual residing in an assisted living facility is $2,905 per month, or $34,860 per year. While most Americans may know the cost of a Ford or BMW, they know little about long term care costs. A 2006 AARP study showed that 80 percent of Americans age 45 and older either don’t know or estimate well below the national average cost of $6,266 per month for nursing home care.
Nonetheless, one fact is certain: these costs are not covered under health care policies and are only covered through Medicare under very specific circumstances. For those whose total assets amount to less than $75,000, Medicaid may still be a viable option. However, as previously noted, the federal government is taking a closer look at this program to help manage its costs and ensure those who receive benefits truly are needy.
Long term care insurance is designed to provide a daily benefit that offsets part or all of the costs of receiving care. However, this is only part of the value that LTCI delivers.
Increase the peace
First, there’s the financial peace of mind that LTCI offers to policyholders and their loved ones. When people secure LTCI, they’re establishing a personal financial safety net for care costs. Instead of draining their retirement assets or relying on the financial support of their loved ones, policyholders can be self-reliant as they realize the true benefit of their decision to insure. LTCI coverage prevents policyholders and their families from having to scramble to cover costs while their loved ones’ health and well being are jeopardized, along with their financial plans.
The LTCI industry is keenly aware of this and is taking steps to broaden who is eligible for LTCI coverage. In addition, overly complex polices are being simplified and becoming more consumer-friendly. Producers’ concerns about LTCI’s historically burdensome application and underwriting processes are also being addressed by the more astute carriers so they can make the product easier for producers to offer.
Eyes wide open
Second, when obtaining LTCI, the individual needs to consider where it fits into his overall financial planning. Naturally, the level and length of coverage will raise a policy’s premiums. Responsible LTCI carriers will provide applicants with resources, such as consumer contact centers and online knowledge guides, to help them fully understand what a policy can cover. However, applicants who have a financial advisor may want to consult him, due to his understanding of his clients’ full financial picture. To respect the advisor-client relationship, some LTCI providers have developed programs tailored specifically toward getting the advisor involved.
More than just coverage
To ensure policyholders get the most value out of their investment, LTCI providers have included a number of value-added services and options. For example, to ensure claimants receive the best care possible, many companies offer care coordinator nurses who help the policyholder set up a plan of care. This helps individuals and their families make informed choices when care is needed and provides the peace of mind only LTCI coverage delivers. Some are also working on wellness initiatives, which are aimed at increasing people’s health spans, which is the period of life during which one enjoys a healthy, independent existence.
Retirement planning is a top-of-mind priority for many, but LTCI is not always part of the equation. Whether it’s simply overlooked, considered too complicated, or its advantages misunderstood, far too often LTCI doesn’t get the consideration it deserves. This can be a costly omission not only for the one needing care, but also for his loved ones.
As our aging population grows at an unprecedented rate, LTCI provides a layer of financial security that can ensure the type and quality of care one receives is dictated by the individual – not by a government program. In addition to alleviating the financial strain, LTCI can remove the emotional and physical strain that long term care can place on the individual’s family. As LTCI providers simplify their policies and the application process further and continue to increase the benefits being offered to consumers, LTCI becomes a simple, wise choice for all Americans.
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