Not many people like to think about insurance, partly because it conjures up the prospect of such ugly events. Visions of flames shooting from a second-floor window send us rushing to buy homeowner’s insurance. Life insurance covers the certainty of death. And we get car insurance for that cringing moment when metal meets metal with a nasty bang.
The thought of long-term care insurance can be just as unsettling. This type of coverage pays for that unwelcome time when you can’t dress yourself or take a bath. It’s the kind of insurance that signals the inevitable winding down of an active life.
As hard as it may be to face that thought, insurance that pays for a nursing home stay may be well worth investigating. Here’s why.
A 65-year-old has a 43 percent chance of entering a nursing home at some point in his or her lifetime, according to the American Association of Homes and Services for the Aging. And of older Americans who say they might need long-term care services within the next year, only one-fourth say they would be able to pay for those services with their own family resources.
Insurance policies for long-term care have been available for years. The policy works like other forms of insurance. You pay a monthly premium and then receive the benefits when certain events trigger the coverage.
Many people mistakenly believe that Medicare will pick up the cost of nursing home care. That’s not so. Medicare pays only for the first 20 days in a nursing home. After that, Medicare and your Medicare supplement insurance may pay some expenses for the next 80 days.
Then you are on your own until you spend most of your assets. When you are just about broke, Medicaid steps in to pay the bills.
Another misconception about long-term care insurance is that it only covers nursing home stays. But that’s not true. Many policies today will pay for assisted-living arrangements and some home health care. It all depends on the coverage you buy.
Experts say a good policy will cover nursing home care and in-home care equally, so you are not forced into a nursing home before you really need it.
The cost of a long-term care policy depends on your age, health and where you live. The average cost is about $1,500 a year.
Compare that to the average annual cost of nursing home care, estimated by experts to be about $39,000, or $107 a day.
Also, if you buy a policy when you are younger, as opposed to older, you will get a better rate and it will be easier to qualify.
Which brings up one of the most difficult aspects of long-term care insurance. It really should be bought when you are in your 50s and in relatively good health. So the adult children of the elderly should be the ones thinking about buying this insurance, not their parents.
If you wait to buy it until you really need it, you won’t be able to get a policy.
Lots of different companies offer long-term care policies, but a few companies write most of the policies, says Murray Gordon, president of Deerfield-based Maga Limited, an agency that specializes in finding consumers long-term care coverage.
Gordon recommends choosing an insurance company that has at least five years of experience in the long-term care field. The company also should get high marks from the financial rating companies, such as A.M. Best or Standard and Poor’s.
Plans available are somewhat flexible. They may cover you for one year, or up to a lifetime of care. And benefits range anywhere from $40 to $250 a day.
Statistics show that most people who go to nursing homes stay there less than 2 1/2 years. So you may want to use that timeframe to figure your need.
Gordon says the policy should probably cover as many types of care as possible. Nursing home benefits should cover all levels of care, including skilled, intermediate, custodial, sheltered and assisted living.
Home care benefits should include RNs, LPNs, physical and respiratory therapy and personal care attendants who generally help with chores and meal preparation.
Also, make sure the policy covers cognitive impairments, such as Alzheimer’s disease.
Typically, you are entitled to policy benefits when your doctor determines there is a medical necessity, you need assistance with several activities of daily living, such as bathing and dressing, or you need help because of a cognitive impairment.
Several years ago, the government decided that some of the costs of a long-term care policy would become tax deductible. Now you have to pick either a tax-qualified or non-tax-qualified policy. The difference is that the tax-qualified, or deductible plans, are more difficult to trigger.
Also, in order to qualify for the tax deduction, you must itemize health insurance premiums plus medical expenses and only medical expenses in excess of 7.5 percent of adjusted gross income are deductible.
Whew! There’s another reason why we don’t like to think about insurance. It’s so confusing.
Resources
Life Services Network of Illinois has a brochure available for consumers on long-term care insurance. You can get a copy by calling 630-325-6170.
Maga Limited is an independent agent specializing in long-term care policies. It offers seminars for seniors groups, and also has several information brochures on long-term care insurance. Call 1-800-533-6242.
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Jane Adler is a Chicago-area freelance writer. If you have questions or information to share regarding housing for senior citizens, write to Senior Housing c/o Chicago Tribune Real Estate Section, 435 N. Michigan Ave., Chicago, IL 60611. Or e-mail adler@megsinet.net
