Taragowski Insurance Agency - Clinton, CT a Full

What is Long-Term Care?

Long-term care is assistance you may need over an extended period of time to manage, rather than cure, a chronic condition or to compensate for a limited ability to function. You may need long-term care services if you need help from another person to perform daily activities, such as bathing, dressing, or eating. You may also need long-term care services if you need ongoing supervision because of deterioration in your mental capacity (such as, from Alzheimer's Disease or other forms of dementia). Contrary to popular belief, long-term care is not an issue just for the elderly. According to Chronic Care in America: A 21st Century Challenge, published by the Robert Wood Johnson Foundation, almost 1 in 4 middle-aged adults between the ages of 45 and 64 were limited in activities in 1994 because of a chronic condition.

Long-term care can be provided in a variety of settings, including your home, in the community (for example, an Adult Day Care Center), a nursing facility, and in a variety of assisted living settings (such as, Continuing Care Retirement Communities, Residential Care Facilities, and Assisted Living Facilities).

Why Purchase Long-Term Care Insurance?

Long-term care insurance pays for part or all of the long-term care services you need. There are several reasons why you might want to consider purchasing long-term care insurance.

The cost of long-term care in Connecticut is very expensive. The statewide average cost for a semi-private room in a Connecticut nursing facility is $327/day and over $119,000 per year. Costs for incidentals, such as a telephone or cable TV, and the cost for a private room would be more. Nursing facility costs in Connecticut have been increasing by more than 5% each year for the last 5 years. While home care can cost less, it is only less expensive when you have family and friends available to provide the majority of care. Without this "informal" support, home care can be as, or more, expensive than the costs for nursing facility care.

Medicare and other health insurance do not pay for the majority of long-term care. Contrary to popular belief, Medicare (the federal health insurance program for elderly and disabled persons) and other health insurance plans are designed to cover mostly acute medical needs. Medicare Supplemental or "Medi-Gap" plans are designed to cover the co-payments and deductibles under Medicare, and therefore, also do not cover most long-term care costs. In addition, health insurance programs pay very little, if at all, for the ongoing needs of someone who has a functional or cognitive impairment. While Medicaid (the federal and state health insurance program for the poor) will pay for nursing facility care and some home care, you must be poor in order to qualify for assistance. For example, a single person can have no more than $1,600 in assets to qualify for Connecticut's Medicaid program.

The risk of needing long-term care is high. According to a national study conducted in 2005, 69% of persons who reach the age of 65 will need some long-term care before they die. Based on another study conducted in Connecticut, the average nursing facility stay in Connecticut is 2 1/2 years. This means the average financial risk for nursing facility care can be approximately $298,000. Because the majority of long-term care is provided in people's homes, the financial risk for any type of long-term care is far greater.

What to Look for in Long-Term Care Insurance

When purchasing long-term care insurance you will need to make several decisions that will influence the cost and quality of the policy.

Should you purchase long-term care insurance now or wait? You should discuss the timing of your purchase with your family, financial and legal advisors, and insurance agent. The younger you are at the time you purchase, the less expensive the premium and the greater the likelihood you will be accepted for coverage. If you select inflation protection that increases both the daily and lifetime benefits of the policy, you will also have a longer period of time for the policy benefits to grow.

What type of long-term care services do you want the policy to cover? Some policies only pay for care received in a nursing facility or assisted living facility. Others provide a comprehensive pool of dollars that can be used to pay for care received in the home, the community, or a nursing facility. The more comprehensive the policy, the more choices you will have in the type of services that will be paid by the policy.

How much of a deductible do you want to pay? Just like car insurance, long-term care insurance has a deductible, which is referred to as the waiting period or elimination period. This refers to the number of days you are responsible for your long-term care costs before qualifying for payments from the long-term care insurance policy. By law, long-term care insurance policies sold in Connecticut cannot have an elimination period that is greater than 100 days. The smaller the number of days selected for the elimination period, the less you will need to pay from other resources.

How much do you want the policy to pay out on a daily basis? For example, if you purchase a policy that pays $300/day, the policy will pay for long-term care costs up to $300/day. If your long-term care services cost more than $300/day, you will need to make up the difference from your personal resources. If one of your goals is to protect your assets, the income you have available to pay for your care plus the daily benefit of your insurance should cover the cost of care. The higher the daily benefit, the less you will need to pay out-of-pocket for care.

How much in lifetime benefits do you want to purchase? This is the total amount the policy will pay out for long-term care services. For example, if you purchase a policy that will pay $150,000 in benefits, the policy will pay for long-term care costs up to $150,000. If the cost of your long-term care services exceeds $150,000, you will need to make up the difference from your personal resources. If you select inflation protection that increases the lifetime benefit of the policy, the amount of lifetime benefit will increase over time. For example, $150,000 in lifetime benefits will increase to $375,000 after 20 years with 5% compounded inflation protection.

The amount of the lifetime benefit divided by the daily benefit will give you an idea of how long the policy will pay for services. For example, if you purchase a policy that pays $200/day up to $200,000 in lifetime benefits, the policy will pay out $200/day for 1,000 days or about 2 1/2 years. The higher the lifetime benefit, the longer the policy will pay for long-term care services and the less you will need to pay out of pocket.

Should you purchase inflation protection? While the answer to this question depends on your personal circumstances, it is important to know that long-term care costs in Connecticut have been increasing about 5% per year. If this trend continues, the cost of nursing facility care in Connecticut will average nearly $300,000 per year 20 years from now. Without inflation protection, the daily benefit amount and the lifetime benefits of your policy will remain the same while the cost of care continues to increase. This means your out-of-pocket expenses for long-term care services will increase over time. While inflation protection is an expensive feature, it can dramatically reduce your out-of-pocket expenses for long-term care services.

The Partnership requires that all benefits, whether daily, weekly, monthly or lifetime, automatically increase annually on a compounded basis for persons under age 65. Persons age 65 and older may be offered the option to inflate only the daily, weekly and monthly benefits on a compounded basis. This option may not be available from all insurance companies participating in the Partnership. Outside the Partnership, some insurance companies give the policyholder the option to increase benefits every few years based on the Consumer Price Index or a fixed percentage. In these instances, if the policyholder decides to take the increase in benefits, the insurance premium is increased to reflect the increased benefits at the policyholder's current age. This could have a significant effect on the cost of the premium over time. Some insurance companies also offer simple inflation protection, which means the inflation increase is always applied to the original purchase amount of the policy benefits.

Because of the various options available for inflation protection, you are encouraged to compare the cost of the premium with the daily and total lifetime benefits now and twenty years in the future for each inflation option you are considering.