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Long-Term Care Insurance, Who Needs It?

I heard a great analogy the other day while attending a seminar for financial planners. "If the baby boomers are the Titanic, cruising on the ocean of life, then the cost of long-term care is the iceberg." Insuring ourselves against the cost of long-term care is something many of us haven't quite accepted.

In my presentations to various groups, I point out that if you really think about it, each of us will pay for our own long-term care costs either by "planning for it" or by "default." By default I mean this, if you try to qualify for Medicaid or another government funding source to pay for your long-term care, you are required to impoverish yourself and possibly your spouse. In addition to that, at your death and the death of your spouse what once was a non-countable asset (your home) becomes subject to Medicaid Estate Recovery. (The state can put a lien on your home and when you heirs sell it, Medicaid can take the profit to "pay back" the cost of your long-term care.)

Medicare, the federal health insurance program for those 65 and older, only pays for a very limited amount of skilled nursing home care. The limit is 100 days, with days 21 through 100 costing the patient a copayment of $105 per day.

Facing the potential of needing long-term care is a risk, yet many of us have chosen to ignore the risk. For example, most of us readily choose to buy auto insurance. According to the insurance industry, you have a one in 240 chance that you will be responsible for an auto accident that causes $25,000 in damage. We all see the need. Statistics also show that you have a one in 1,200 chance that your home will burn to the ground and you will incur an average loss of $160,000. Most of us wouldn't think of not having homeowners' insurance.

The fact is that most of us will live well into our 80s. Statistics show that you have a one in two chance of needing some type of long-term care during your lifetime with an average cost of $120,000. Without insurance or a plan to cover these costs, you have ignored one of the most common and most expensive of all risks. Is this really what you intended to do?

Who should buy long-term care insurance? If you want to leave assets or an inheritance to your heirs, you need long-term care insurance. If you want to be in control of the services you receive and when you receive them, you need long-term care insurance. And, lastly, if you don't want to use your savings to pay for nursing home or in-home care, you need this type of insurance.

There are numerous insurance companies that offer long-term care insurance. Your concern should be to select a company that has a strong financial rating.

Mr. Haas is executive director of the White River Area Agency on Aging, Inc. in Batesville. He is also a financial planner, registered investment representative and a licensed insurance agent. He can be contacted at 800-382-3205 or by e-mail at Ed@wraaa.org