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Money, Insurance News for Seniors & Boomers
Educating Boomers on Realty of Long-Term Care is
Focus of Awareness Week
Industry event urges proactive approach
to planning for LTC
November 4, 2006 Educating baby boomers about the
"reality of long-term care" and urging them to take a proactive approach
to planning for these needs is the focus to Long-Term Care Awareness
Week, an industry sponsored campaign that kicks off tomorrow.
The first of the nation's 78.2 million baby boomers
turned 60 this year and an additional 7,900 reach that same milestone
every day. With advances in medicine, most boomers can expect to live
into their 80s and 90s, but industry experts warn that more than 95
percent of them are unprepared for eventual long-term care needs
associated with living a long life.
According to Jesse Slome, executive director of the
American Association for Long-Term Care Insurance (AALTCI), most people
acknowledge it's a mistake to put off retirement planning until age 60,
but not enough realize the same is true for planning for long-term care.
"Those who delay long-term care planning until
after retirement may find themselves unprotected against a risk that
could wipe out their retirement savings. Our goal is to educate
soon-to-be retirees so that they can make informed decisions about their
future and protect the assets they worked hard to accumulate."
As life expectancies increase, the likelihood of
needing long-term care -- either at home or in a nursing home --
increases. Health care and long-term care costs have increased faster
than the Consumer Price Index, according to AALTCI studies. "In 15
years, today's 60-year-old can expect to pay $80,000 - $120,000 for a
single year of care," Slome said. "For those who are uninsured, the cost
of long-term care for even two or three years can wipe out one's
retirement savings."
The Association and several thousand long-term care
professionals nationwide are encouraging individuals to start thinking
about long-term care now and to get their families involved. A recent
survey conducted by Mutual of Omaha, a supporter of Long-Term Care
Awareness Week, revealed more than 41 percent of those people who have
purchased long-term care insurance said their primary motivator was to
not be a burden on their family.
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National LTC Insurance Price Index |
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According to figures released in June, long-term care insurance
protection for a typical 55-year-old in good health costs $772-per-year.
The average annual cost for a 65-year-old who doesn't qualify for
preferred health discounts is $1,456 according to the 2006 Long-Term
Care Insurance Price Index reported today by the American Association
for Long-Term Care Insurance.
"The cost for long-term care insurance protection
varies by the age, marital and health status of applicants as well as
the level of coverage purchased and even the state of residence,"
explains Jesse Slome, Executive Director of the trade organization that
gathered the data. "The 2006 national study compared policies offered by
insurers that make up roughly 90 percent of all policies sold in the
U.S.
"For 2006, the study sought the average cost for a
55-year-old who qualifies for both preferred health and spousal
discounts. Cost: $772 for a 3-year policy that provides roughly $110,000
in current protection," explains Slome. The study only compared costs
for policies that include a compound inflation option. "The
policyholder's benefits increase at five percent compounded annually, so
if care is needed in 15 years the $65-a-month policy premium provides up
to $227,823 in benefit payments," Slome notes.
The average cost for a 65-year old who qualified
for a spousal or partner discount but not the preferred health savings
would be $1,456-per-year, according to the study. "Health changes as we
age, and less than a third of those who apply in their sixties qualify
for preferred health discounts versus 44 percent who qualify in their
fifties," Slome notes. "The ability to lock in good health discounts can
save you 10-to-20 percent yearly."
"2006 National Long-Term Care Insurance Price Index
Age 55 - $772-per-year ($100 Daily Benefit x 3 Year
BP, individual qualifies for preferred health and spousal discounts
Age 55 - $1,156-per-year ($150 Daily Benefit x 3
Year BP, individual qualifies for preferred health and spousal discounts
Age 65 - $1,456-per-year ($100 Daily Benefit x 3
Year BP, individual qualifies for standard health and spousal discounts
Age 65 - $3,068-per-year ($150 Daily Benefit x 3
Year BP, individual is single (standard health)
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"Past generations have relied upon family members
to provide care," said James Blackledge, senior vice president and
product line officer at Mutual of Omaha. "Many boomers who have
experienced caring for their own parents do not want to impose the same
burden on their children. The decision to purchase long-term care has
become a decision that does impact the entire family."
During Long-Term Care Awareness Week, insurance and
financial planning representatives across the country will be in full
force to educate consumers about some of the following common
misconceptions that prevent people from properly planning for long-term
care:
Five Common Misconceptions About Long-Term Care
1. Medicare will pay for any long-term care you
might need during retirement. Medicare covers skilled nursing facility
care only after a three-day hospitalization. It does not pay for
custodial or intermediate care, which the majority of care provided in
nursing homes is considered. Long-term care insurance covers a variety
of custodial services at nursing homes, assisted living facilities and
at an individual's home -- even housekeeping services.
2. You can transfer assets to a child to qualify
for Medicaid. After you have exhausted all of your assets, you may
qualify for coverage under Medicaid. However, with Medicaid you lose
choice over the care received. In addition to nursing home care,
long-term care insurance covers home health care services, assisted
living facilities, hospice care and adult day care. Under new law, the
federal government can look back up to five years for outright gifts to
your children or other relatives and the equity in your home could be
counted as an asset.
3. You don't need to start thinking about
long-term care protection until retirement. Long-Term Care Insurance
premiums are based on your age when you apply, and costs increase 8-9
percent for each year you wait. Insurance companies offer incentives for
individuals who are in good health when applying for long-term care
coverage. So, you will pay less if you purchase insurance when you are
younger and in good health.*
4. Long-term care insurance is just too
expensive. Insurers offer discounts for spouses (and in some cases
partners) who apply for protection, which can reduce the cost by 15-40
percent each year. Some products offer "shared care" features that allow
spouses to tap into each other's benefits when one exhausts his or her
own maximum lifetime benefit. The federal government and some states
now offer tax deductions and/or credits to individuals and business
owners who purchase long-term care insurance. The cost may be 100
percent tax deductible for business owners. Plus, it is possible to
purchase "limited pay" policies so that insurance protection is
paid-in-full prior to retirement age.
5. It's too late to purchase long-term care
insurance. While most experts agree, the younger you are, the more
coverage options and better rates you will find. However, there are
products that are designed with those 65 and older in mind.
The American Association for Long-Term Care
Insurance is an independent, organization dedicated to professionals in
the long-Term Care insurance marketplace. Mutual of Omaha is a
full-service, multi-line organization providing insurance and financial
products for individuals, businesses and groups throughout the United
States. Mutual of Omaha has offered long-term care insurance since 1987.
For more information on Long-Term Care Awareness
Week, visit
http://www.aaltci.org.
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