Long-term care insurance: The long and short of it

                According to AARP, being incapacitated can get very expensive. The Washington, DC-based organization reports a private room in a nursing home costs about $74,000 a year, and a home health aide an average of $18 an hour.

 
You say you could not begin to afford those costs? If you're in your 50s today, imagine how high those expenses may be 25 years in the future. Little wonder that older Americans are investing in long-term care insurance.

Nursing home costs are often cited when arguing in favor of long-term care insurance. "What long-term care insurance really does is give you choice and options," says Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI).

The AALTCI conducts a yearly study of newly opened long-term care insurance claims, and has reported that 49 percent of them are paying for home health care. Another 24 percent of claims start when the insured is in an assisted living facility and just 27 percent when he or she is in a nursing home.

When to buy
The ideal time to buy long-term care insurance is when you are healthy, and in your early to mid-50s, says Amy Danise, editorial director for Foster City, Cal.-based Insure.com. "The coverage price really starts going up in your late 50s," she adds. "By your early 60s, you're looking at the price being quoted for long-term care, and it starts to look pretty unaffordable."

Sally Hurme, senior project manager in AARP's Department of Public Education and Outreach, citing statistics from the National Association of Insurance Commissioners, reports the average age at which consumers buy long-term care insurance is 57. "That 50 to 60 age range is the decade in which people are buying long-term care insurance, and that's sort of the target age to be thinking of this," she says.
The best reason to act at younger ages is to qualify for coverage, Slome adds. You may be fine now, but in 24 hours, your health could change to the extent you would not be able to buy coverage at any price, he says.
Between ages 50 and 59, 17 percent of applicants for long-term care insurance are denied coverage. That number rises to 24 percent for those between 60 and 69, and 45 percent for those ages 70 to 79, Slome says.
Despite the fact older adults are urged to obtain coverage at earlier ages, age 64 is a very popular time to apply for coverage, Slome adds. That's because it's the year before Medicare coverage goes into effect, with its opportunity for more affordable preventive testing.
Many variables
One of the difficult aspects of determining which long-term care insurance policy to buy is the wide array of variables that must be considered. "This is a complex form of protection," Slome says. "With long-term care insurance, there are some really important differences that separate one policy from the next. You will see a 40 to 80 percent spread in what various policies cost."
Variables include the daily rate covered, typically $100 to $150, and waiting periods of 60, 90 or 120 days until the benefits kick in, Hurme says.
"The longer the waiting period selected, the lower the premium," she adds. "But your care could be very expensive during that waiting period. Or you could get well during that waiting period, and not need the benefits."
Policies also vary based on how incapacitated the insured must be before benefits are forthcoming, Danise says. The level of incapacitation is typically expressed in terms of Activities of Daily Living, or ADLs.
Policies that begin paying when the insured individual needs help with one or two ADLs are better than those that pay off only if more ADLs are impacted.
Another variable is how effectively policies keep pace with inflation, Slome says. Policy A and Policy B may both have 3 percent inflation growth.
"You think they're the same," he says. "But there could be nuances in how they each define that and that could mean the difference between getting or not getting an extra three or four months of coverage."
Shop around
When purchasing long-term care insurance, the best bet is to purchase a policy offered by an established and strong company, experts say. Genworth and John Hancock are the biggest names, followed by Prudential, Mutual of Omaha and Transamerica. Others round out the approximately 20 providers, says Slome, who urges consumers to purchase through an insurance broker.

Copyright © 2012, Chicago Tribune
View the original article here

Posted in: