Considering LONG-TERM CARE INSURANCE

Our firm has conducted much research regarding long-term care (LTC) insurance.  The result?  The need for a long-term policy increases as we get older.  However, actually getting what you thought you paid for when you bought your policy may change by the time you actually need it.  Actually qualifying for LTC reimbursements is finicky and depends on the multiple on-going changes in the LTC industry.

Why You Should Consider LTC

Regardless of an insurance provider's scruples, this does not minimize the actual need for something like LTC.  The following are reasons we should consider LTC taken from JT Ryan.  Most of the statistics reflect numbers from other sources in 2004:

• Today, the projections are that six in 10 Americans who live to be 65 years old will experience a long-term care event.

• The average daily rate for a private room in a nursing home in the United States is $192 or $70,080 per year.  The average stay in a long-term care facility lasts 2.4 years, which means that the average stay in a facility costs over $168,000.

• Many people mistakenly think Medicare covers long-term care.  Medicare covers only about 11% of the cost of care received in a nursing home and specific requirements must be met.

• For working caregivers, a "career" of care giving cost an average of $659,139 in lost salary, promotions, benefits, Social Security and pension contributions.

• Accommodations made for working caregivers cost US employers between $11.4 and $29 billion dollars per year in lost productivity.

• Long-term care is the assistance provided when we are no longer able to live independently and need help with activities of daily living due to a prolonged physical illness, a disability, cognitive impairment or just growing old and becoming frail.

• Activities of daily living are defined as: bathing, dressing, eating, transferring, toileting and continence.  Cognitive impairment includes memory loss, disorientation or inability to reason.

• Chances increase that as we age we will develop a chronic condition, physical disability or cognitive impairment that will require assistance.  Almost 38% of people aged 65 and over are diagnosed with a severe disability, and 47% of those aged 85 and older have Alzheimer's Disease or other form of dementia.

• Today, 72% of nursing home residents are female and 75% require assistance with three or more activities of daily living.

• In the US, Medicaid covers about 50% of the cost of long-term care received in nursing homes.  But to qualify for Medicaid you must spend down assets to the poverty level and meet specific requirements.  These requirements may affect assets and lifestyles of healthy family members.

• Today's long-term care insurance policies offer a wide range of care options including care in one's own home, assisted living facility, Alzheimer's facility, adult day care, nursing home and hospice.

• Today, 37% of those receiving long-term care assistance in the US are working age adults between 18 and 64.

Things To Watch For When Considering Long-Term Care Insurance Policies

There may be several reasons to purchase a LTC policy, but there are also several things to watch out for that can essentially leave you, the policy owner, holding the bag with nowhere to turn.

1.  Compare prices.  Monthly premiums can vary by hundreds of dollars for the same service and some 'add-on's' to the policy may be extraneous.

2.  Buy for quality and value, not necessarily the cheapest policy.  There is a temptation for some emerging LTC insurance policy providers to offer extremely competitive premiums in order to increase their market share.  This surely is not the case for all companies, but the thing to be aware of is the staying power for the company.  Whereas, if the company gets in a bind because they did not charge enough from the start, they may be forced to sharply increase their premiums or rearrange the gray areas of the policy making it more difficult to qualify for reimbursements.

There may also be the temptation to purchase a policy while you are younger and the premiums are cheaper.  As a result of rapid changes in the LTC industry, the criteria of the policy may change by the time you actually need the policy.  So, if you do purchase a policy at say, age 40, meet with your policy advisor on a regular basis to keep up with any key changes in the industry that could affect the criteria of your policy.

3.  What Qualifies As A 'Facility'?  Believe it or not, there is no national or industry 'standard' on what qualifies as a LTC facility.  So, make sure you get a clear definition of what your policy's definition of a qualified facility actually is and make sure the facility you want fits your policy's definition.  You may also want to consider other facilities as alternatives.  For instance, as a convenience to your closest relatives, you may want to consider a facility that is in closer proximity to their city or neighborhood.

4.  Rate Increases.  Policies may 'guarantee' that your premiums will not increase unless they go up for all the policy holders in your 'class'.  Again, the term 'class' can be too general to nail down a specific definition, thus allowing them to increase your rates.  Therefore, make sure the language in your policy states that the rates will not go up unless the rates for your STATE go up.

What Should You Do Next?

As you can see, LTC insurance is not a clear cut answer to long-term care needs.  There is certainly some fear and uncertainty that is inherent when considering the need for long-term care alternatives.  Families with substantial assets can certainly consider self-insuring and those who have less than about $1 million in investments might want to consider how a long-term care event might alter their lifestyle.

Please feel free to contact any of the professional advisors at First Investment Corporation who can help you decide how to take the next step.

Securities Offered Through Dominion Investor Services, Inc. Member FINRA and SIPC.