Healthy Aging Column – Long Term Care Insurance

Dreams of traveling more, spending more time with family or starting a hobby often fill the minds of people approaching retirement. It’s fun to visualize walking the beach of an exotic island. We think about using our IRAs, mutual funds and pensions to pay for those activities. In contrast, most people don’t like to visualize needing long-term care. In fact, most people avoid thinking about it.

With longer life expectancies, the cost of long-term care is an increasing financial risk that adults need to consider. The risk of long-term care can be handled in several ways.

You can avoid it, hoping for the best, and try to stay healthy. Of course, there are no guarantees.

You can retain the risk. In other words, self-insure your long-term care by paying all the costs from your own net worth.

The third option is to transfer the risk by buying a long-term care policy. You then pay an insurance company to handle the risk.

The fourth option is to use a combination of these options. Try to stay healthy, pay some of the costs yourself and perhaps purchase an insurance policy, too.

As you make this decision, consider the likelihood of needing long-term care services. A University of Illinois Extension study found that, while 37 percent of people who died at age 65 spent some time in a nursing home, 71 percent of those who died at 95 years of age or older had spent time in a nursing home. The more physically disabled you are, the more likely you are to need long-term care. An elderly woman is more likely to use a nursing home than an elderly man.

Individuals without children, a spouse or other family members to provide informal care at home are more likely to use a nursing home. One study found that approximately one-quarter of those who were married at the time of death had spent time in a nursing home. In contrast, over two-fifths of the people

widowed, divorced or never married at death had used a nursing home. Family members provide about two-thirds of the long-term care needed by people age 65 or older. Researchers found that 73 percent of the elderly long-term care population rely entirely on out-of-pocket expenditures and unpaid caregivers as opposed to public resources to pay for their care.

While predicting the future is impossible, start considering long-term health care costs and your alternatives for managing these costs. All the alternatives will impact your financial plans.

If you decide to purchase a long-term care insurance policy, be sure you understand what is covered and how you qualify for benefits. Purchase a policy with a compound inflation rider to increase the amount of benefits over time. Choose an appropriate elimination period based on the number of days you can afford to pay out-of-pocket. Paying for more of your care yourself will lower the insurance premium.

Check the financial stability and experience of insurance companies, especially their track record in providing long-term care coverage. Premiums for similar benefits should be competitive with other policies. Ask about discounts. Be sure you can continue to pay the premiums. Look for policies that count days in the deductible period cumulatively over several stays, rather than consecutively during one stay. Steer clear of policies that require prior hospitalization. Compare at least three company policies and ask questions to be certain you understand the coverage provided.

Colorado State University Cooperative Extension fact sheet 9.152, "Long-Term Care Insurance," is available online at or by contacting your local Extension office. This fact sheet is useful when considering long-term care insurance. Make planning for long-term care a part of your long-term financial plan.

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