Long-Term Care Insurance
Long-term care insurance is something that both baby boomers and their parents should consider. If your parents are 80-plus, it's really too late to be of any value. If they're in their 60s and early 70s, listen up.
Long-term care insurance is rather new to the insurance scene. We're all used to life insurance, car insurance, and disability insurance (you might not realize it, but if you're working, Uncle Sam has you covered through Social Security). The whole deal with insurance is to protect yourself against a major loss that you can ill afford. Bottom line: You don't want to take the risk. Insurance companies know that lots of people are just like you. So they ask large numbers of people to pay a set amount of money (the more the better) and they'll take the risk for you. They, of course, hope you're a lucky soul and they'll never have to pay out. The more the risk is shared, the less everybody needs to chip in.
How Much Does It Cost?
If your parents are 65 years and older, they have a 43 percent chance of requiring nursing home care at some point in their lives. Half of all elderly women will probably use nursing home care before they die. One out of five of those who enter nursing homes will be there for five years; half are there for one year.
The problem right now with long-term care insurance is that the numbers of people buying into it are still pretty small. In fact, less than 1 percent of all the money spent on long-term care in this country is paid from a long-term care policy! So, without a large base to spread the risk, the premiums are pretty high. Prices range from $3,000 to $8,000 per year, depending on the kinds of benefits you pick, how long a waiting period you choose before the benefits kick in, and how many years of nursing home coverage you choose.
Enter the chicken-and-the-egg game: Not until more people join up will the insurance premiums come down. Not until the premiums are lower will more people join up. In the meantime, the costs of long-term care can bankrupt many American families. The average nursing home costs $50,000 per year. Can you handle $1,000 a week?
Why Buy Long-Term Care Insurance?
When you think of it, the odds of needing nursing home care are a lot higher than losing your house to fire, totaling your car, or being so disabled you can never work again. Yet, we don't think of being without car insurance or homeowners insurance. Why the hang-up over long-term care insurance? Well that's not too hard to figure: Who likes to think about old age or nursing homes? Who likes buying insurance? Besides, when people do think about it, they're convinced that Medicare covers nursing homes or the state will pick up the tab. Wrong on the first count, and you better be poor on the second count. On top of all this, you're feeling sandwiched: Everyone's on your case to put money aside for your kid's college bills and sock money away for your retirement. And you're to do this while you're paying a mortgage, car loans, and just plain having a life. So what should you do? And what should your parents be doing when it comes to long-term care insurance?
There are five major reasons why people buy long-term care insurance:
- To maintain their independence so they won't have to rely on family members
- To protect their assets against the high costs of long-term care; to preserve their children's inheritance
- To make long-term care services affordable, such as home health care and custodial care
- To provide themselves with more options than just nursing home care, and to pay for nursing home care if it's needed
- To preserve their standard of living
If any of these reasons strike a chord with you and you know that one year of nursing home care or intensive home health care (about two-thirds of the cost of nursing home care) would slam your family's resources, you should seriously consider getting a policy. This is especially true if your parent does not want to deplete his or her estate by paying for care and/or there is a strong history of debilitating illnesses in the family (stroke, Parkinson's, Alzheimer's) that often point to long-term care.
More on: Aging Parents
Excerpted from The Complete Idiot's Guide to Caring for Aging Parents © 2001 by Linda Colvin Rhodes, Ed.D. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.
To order this book visit the Idiot's Guide web site or call 1-800-253-6476.