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Money, Insurance & Investments for Seniors
Do You Need Long-Term Care Insurance? Ten Tips and
Six Considerations
Nine million senior citizens will require long-term
care at $74,806 a year
July 19, 2007 - With health care costs rising and
longer life expectancies, funding long-term care needs is an increasing
concern for millions of people, especially senior citizens. According to
the U.S. Department of Health and Human Services, about 9 million
Americans, now 65 or older, will require long-term care. HHS expects
that number to rise by 25 percent - to 12 million - by 2020.
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Money, Insurance & Investments |
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The average
annual cost of nursing home care is $74,806, according to Genworth
Financial's 2007 Cost of Care Survey, but that figure can fluctuate
depending on the level of care required, and the state in which the care
is provided.
"Consumers who would like to protect their assets,
minimize dependence on family members and control how they receive
nursing or home care, should carefully consider long-term care
insurance," said Sandy Praeger, National Association of Insurance
Commissioners (NAIC) President-Elect and Kansas Insurance Commissioner.
"It's a highly individualized decision that
requires people to look closely at multiple factors including their
family health history, dependent relationships and personal financial
situation."
To help consumers make more informed decisions
about long-term care insurance coverage, the NAIC provides information
and considerations that should be considered
Understanding the Basics of Long-Term Care
Insurance
When people are unable to perform activities of
daily living -- such as eating, dressing and bathing -- long-term care
insurance can pay for the services of nursing homes, assisted-living
facilities and in-home caregivers. Importantly, long-term care insurance
covers expenses for those diagnosed with a chronic illness such as
Alzheimer's disease, Parkinson's disease, multiple sclerosis and
diabetes.
Standard health insurance policies and Medicare
usually do not pay for long-term care expenses associated with these
illnesses. Medicaid provides limited long-term care benefits -- and only
after a person's assets have been depleted.
"People are living longer, but they often don't
have the ability to take care of themselves as they reach the older
ages," said Walter Bell, NAIC President and Alabama Insurance
Commissioner.
"Because these costs can become prohibitively high,
interest in long-term care insurance is increasing. We encourage
consumers to visit our Web site and take the long-term care quiz to find
out more about their options." The quiz is located on the right-hand
side of the home page of www.insureUonline.org.
A major consideration for purchasing long-term care
insurance, according to the NAIC, is whether individuals have assets
they want to protect, as the substantial annual cost of long-term care
can quickly deplete even a sizeable nest egg.
On the other hand, if one's retirement savings are
minimal or non-existent, he or she would likely qualify for Medicaid in
a very short period of time, significantly diminishing the need for
long-term care insurance coverage. According to the NAIC, consumers
should not purchase long-term care insurance if they are currently on
Medicaid or their only source of income is Social Security.
Ten Tips Regarding Long-Term Care Insurance from
the NAIC
1. Investigate long-term care coverage if you
don't want to rely on
others to support you, and you want flexibility in choosing the
type
of long-term care services.
2. Long-term care insurance isn't for everyone.
If you are currently
receiving Social Security or expect to have minimal or no
retirement
savings, you will likely qualify for state aid and should not
purchase
long-term care insurance.
3. Research individual insurance companies to
see whether they have a
history of raising rates for long-term care coverage. Check with
your
state insurance department to learn how your state regulates
rate increases.
4. Check with your financial advisor or
accountant for guidance on
whether long-term care insurance is appropriate for your specific
financial situation. If long-term care insurance is for you, shop
around for the most appropriate coverage at the best price.
5. Make sure you understand what a long-term
care insurance policy covers
and just as importantly, what it doesn't. Ask questions and make
sure
the company is reputable and licensed to sell insurance in your
state.
If you have concerns about a company, contact
your state
insurance department.
6. Pre-existing conditions, conditions that you
have before you apply for
the insurance coverage, may be excluded from coverage. In
addition,
for some policies, age 60 is a trigger for a rate increase. Thus,
it
may be beneficial to purchase your policy before your late 50's.
7. Don't rely on Medicare or Medicaid to cover
your long-term care needs.
Medicare will usually pay for a small
percentage of nursing home
costs. Medicaid pays for long-term care services but only if you
meet
federal poverty guidelines, and the choice of care facilities can
be
very limited.
8. Keep in mind that tax breaks are available
for qualified long-term
care insurance policy premiums. The benefit payments received
under
such policies are tax-free.
9. Do not divulge personal financial or medical
information over the
phone, such as your social security number, your health status,
your
Medicare status or your private insurance coverage. Don't be
fooled by
mailings about long-term care insurance that appear to be from an
official government source. If you are concerned that someone is
trying to trick you, contact your state insurance department.
10. Be wary of advertising that suggests Medicare
is associated with a
long-term care policy. Medicare does not endorse nor sell
long-term
care insurance.
Six Special Considerations Regarding Long-Term
Care Insurance from the NAIC
The NAIC advises consumers to make sure the
following items are included in their long-term care policies:
● An "outline of coverage" that clearly
describes the policy's benefits,
terms and limitations in detail. It is important to understand how
much money the policy would pay, and how much the policyholder
would
be responsible for out-of-pocket.
● A clear description of the elimination period.
Some policies have a
set number of days that must be spent in a nursing home or in
claims
status before the long-term care insurance coverage kicks in.
● At least one year of nursing home or home
healthcare coverage or both,
including intermediate and custodial care.
● The right to cancel the policy for any reason
within 30 days of
purchase and receive a full premium refund.
● A guarantee that the policy cannot be canceled
or terminated because
of the policyholder's age or physical or mental health condition.
● Consider an inflation protection option that
periodically increases
the benefit level without the need for the policyholder to provide
evidence of insurability.
"Consumers can easily protect themselves from being
scammed by fake long-term care insurance policies," said Catherine J.
Weatherford, NAIC Executive Vice President and CEO. "Before purchasing a
policy, take the time to stop, call and confirm with your state
insurance department that the company is authorized to sell insurance in
your state."
For more information about insurance options, or to
order a copy of the NAIC's free booklet, "A Shopper's Guide to Long-Term
Care Insurance" visit www.insureUonline.org. The site is also available
in Spanish at
www.insureuonline.org/espanol.
The NAIC offers tips and considerations through its
public education program, Insure U - Get Smart About Insurance, at
www.insureUonline.org.
Additionally, answers to many common questions
about long-term care insurance can be found in the NAIC's free
"Shopper's Guide to Long-Term Care Insurance," which can be ordered
online at
https://external-apps.naic.org/insprod/Consumer_info.jsp. Consumers
can also obtain the guide by calling their local state insurance
department.
ABOUT THE NAIC
Headquartered in Kansas City, Missouri, the
National Association of Insurance Commissioners (NAIC) is a voluntary
organization of the chief insurance regulatory officials of the 50
states, the District of Columbia and the five U.S. territories. The
NAIC's overriding objective is to assist state insurance regulators in
protecting consumers and helping maintain the financial stability of the
insurance industry by offering financial, actuarial, legal, computer,
research, market conduct and economic expertise. Formed in 1871, the
NAIC is the oldest association of state officials. For more than 135
years, state-based insurance supervision has served the needs of
consumers, industry and the business of insurance at-large by ensuring
hands-on, frontline protection for consumers, while providing insurers
the uniform platforms and coordinated systems they need to compete
effectively in an ever-changing marketplace. For more information, visit
NAIC on the Web at:
http://www.naic.org/press_home.htm
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