Considering Long-Term Care

Having the right insurance can protect your assets

the Aging (AAHSA), 60% of Americans who live to be 65 will need long-term care. Ten percent of Americans in 2000 who needed home-care services were African American, one-third of whom were under 65, according to the U.S. Department of Health and Human Services.

“There are two kinds of people in long-term care facilities,” says Payne. “One is what I would call short-to-moderate term, where you have a stroke and need to go into a long-term care facility for rehabilitation with the idea that you’ll be there for three or four weeks and you will recover. There’s another population [with] more significant medical problems. They need daily nursing care; they need daily supervision, in which case long-term care may be provided for the rest of their lives.”

While some argue that $1,337 a year–the average annual long-term care insurance premium for those under 65–is too much to pay for care you may never need, consider this: You could pay that amount for 50 years and still spend less than the cost of one year in a nursing home, which averages $74,095 for a private room, according to the AAHSA.
“You really need to start looking seriously at long-term care as early as age 45,” says Brenda Collins Powell, a Santa Barbara, California-based independent agent representing American Family Life Assurance Company of Columbus (AFLAC). Younger applicants for long-term care not only save money, they’re also more likely to qualify since those who already have medical problems can be denied.

Choosing a Policy
There are a number of things to consider when choosing long-term care insurance. Before buying, check to see what your employer offers, advises Greg Daugherty, executive editor of franchises for Consumer Reports.

Life insurance companies typically offer long-term care insurance as well, so check with your current provider and its competitors. Insurance industry associations such as the Insurance Information Institute and the National Association of Insurance Commissioners can also provide information.

You’ll want the insurance provider to be around when it’s time to cash in your policy, so always check the rating on the company’s debt issues through firms such as Moody’s Investors Services (www.moodys.com).

Policies will pay for long-term care for a specific amount of time, such as three years, five years, or an unlimited period. The cost of the premium is based on current age, health, and length of policy, as well as your selected waiting period and any extra benefits you might choose. But don’t buy too much: A survey by the American Association for Long-Term Care Insurance found that only 8% of policyholders with three-year plans needed more than three years of care.

Review Your Options
Make sure your policy gives you a choice of long-term care options and benefits. You don’t want to be forced into a nursing home when you would prefer at-home care. Also, look for a policy that offers inflation protection. With nursing home costs rising 6% from 2005 to 2006, it’s impossible to know how much coverage you’ll need 10 years from now. With inflation protection, your benefit will

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