With more an more people living longer, we must all think about our long term care needs and concerns. Here are some of your basic questions about long term care insurance answered.
Though a somewhat new concept, long-term care insurance is just like any other insurance policy. The insured makes premium payments to an insurance company in return for the company’s promise to pay for a specific coverage – in this case, nursing home or home health care costs.
Who needs it?
According to Dan Sheets, owner of Kentucky Insurance World, the person who needs LTC insurance is “the individual who wishes to preserve whatever savings they have accumulated for retirement.” With nursing home costs skyrocketing, the danger is that baby boomers will have to exhaust their savings to pay for health care costs. “There is no magic dollar amount of how much you need,” Sheets says, “but a policy that protects and pays for at least two to three years should be minimum.”
What should I look for in a policy?
There is more to look for in a policy than just the cost of premiums. “The two most important things to look for are the commitment the company has in the long-term care industry, and the purchasing of an inflation rider,” Sheets says. The inflation rider allows the policy benefits to grow and keep pace with rising health care costs.
At what age should I consider a policy?
While there are rare cases where a young individual has a need for long term nursing needs (such as a 20 something who suffered a severe car accident) it is not likely you will need long term care benefits until much later in your life. In general, age 50 is an appropriate age to start considering purchasing a policy. The risk of waiting includes that the cost of insurance could increase dramatically or that you could be unable to qualify due to changes in health.
What else should I consider?
Ask your agent if you qualify for any discounts which might lower the premium of your policy. For example, a husband and wife might qualify for a marital discount. Other discounts include multi line (you also have life, home, or auto insurance with the company), preferred health discount, and discounts for certain groups such as retired teachers.
This is a weekly featured post on Own The Dollar from Sara Peak, a Certified Financial Planner and a veteran of the finance industry. In addition to her monthly “Money Matters” column in Kentucky Living magazine, she also writes about money and personal finance topics on her blog.
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