Is Long Term Care Insurance Right for You?
With the baby boomers retiring, a greater number of people will need long term care in the coming years. In fact, studies show that 70% of people age 65 or better will need some long term care at some point. Medicare does not pay for long term care, and conventional health insurance typically pays for hospitalization or rehabilitation services only for a limited time period. This is why long term care insurance is becoming more popular.
Technically, insurance companies determine that people qualify for long term care when they cannot perform two of six everyday tasks: bathing, dressing, personal grooming, walking, feeding and being able to control the elimination functions of their body.
Paying for help with these activities is expensive. Assistance for a person with early onset dementia costs, on average, $5,000 dollars per month. A nursing home stay costs on average $55,000 to $170,000 annually, depending on what city the nursing home is in.
Long term care insurance can give people peace of mind regarding their care during a period of incapacity. When assistance is needed with daily living, long term care insurance pays for that help in the home, in a nursing home or in an assisted living facility. However, because of its expense, long term care insurance is suggested for some people and not suggested for others.
People with low incomes do not need long term care insurance because Medicaid will pay for their long term care if it is needed. People who want a sure thing may not want to buy long term care insurance because after paying for it, they may never use it. People who want to be assured of some benefit may want to instead consider life insurance policies that have a long term care insurance rider.
On the other hand, people with middle and high incomes are encouraged to buy long term insurance. Although Medicaid will pay for long term care, the program employs a means test to see if a person qualifies. People with assets have to spend them down to reach the Medicaid threshold. Most people do not want to do this.
And before thinking that one's assets can be tucked away in a foreign bank account before applying for Medicaid, it is important to know that since 2006, the federal government has had a 5 year "look back" period in place to see if a person's assets are hidden or have been transferred to a family member. If so, Medicaid will not pay for long term care.
Married couples should consider buying long term care insurance because statistics show that in more than 90% of marriages, at least one person will need long term care at some point in life.
Single people should also consider buying a long term care policy. They will not be able to rely on children to assist them as they age.
So long term care insurance is not for everyone, but in certain circumstances, it can provide a sense of security and be part of a comprehensive financial plan.
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