Long Term Care Insurance

It was only a decade ago when, in many cases, long-term care insurance was defined as a policy that only covered skilled nursing expenses in a licensed skilled care facility. As that old song goes " the times they are a changing…" Today, long-term care insurance has become a product that will protect a person’s hard-earned assets from the financial devastation of many unforeseen accidents or illnesses, at any age.

Coverages have been expanded to include assisted care facilities, adult daycare centers, and care in your own home. Most policies are very flexible in both options available and underwriting. Even with all the coverage improvements and media attention, there are still many myths surrounding the purchase of long-term care insurance. Here are a few:

Myth #1 "The government will cover me." Congress passed the Kennedy-Kassebaum Bill in 1996 and in doing so, gave a clear message: The government will not be responsible for paying for long-term care. Medicare for example, only covers skilled care. Most care is not skilled care and the average time a patient receives skilled care is 30 days. Medicaid is a state-administered program, which requires impoverishment in order to qualify for benefits. People who have assets in excess of the allowable minimums must spend down their assets in order to qualify. Under Medicaid, the choice of who will provide the care, and where, is limited. To encourage the individual purchase of long-term insurance, premiums may be deductible and benefits are paid tax-free.

Myth #2 "I’ll pay for it out of savings." With nursing home costs averaging approximately $46,000 per year, more than 70% of people entering a nursing home will deplete their savings within one year. Home health care is also expensive, and individuals could quickly see their assets depleted if care is needed.

Myth #3 "It won’t happen to me." Denial is one of the more common reasons people fail to protect themselves from long-term care expenses. During seminars, attendees are often asked to raise their hand if they think someone in the room will need long-term care services. Usually everyone raises their hands. When the same people are asked to keep their hands up if they think it will be them, almost every hand is lowered. Studies indicate that 43% of all Americans will need long-term care at some point. 40% of those receiving long-term care are under age 65, and an estimated 60% of the population over the age of 65 will require long-term care at some point in their lifetime. Bottom line? The risk is very real.

Myth #4 "My family will take care of me." Years ago, it was common for families to have several children who lived near their parents and were available as caregivers for parents and relatives. Today, families are smaller and children are more likely to reside out of state, making them unavailable as caregivers. Both spouses in many households have careers, and cannot afford to give up one income in order to become a caregiver.

Myth #5 "I can’t afford long-term care insurance." Although long-term care insurance might seem expensive, the cost of not having it could be much greater. After all the myths surrounding long-term care insurance have been dispelled, the facts speak for themselves. Long-term care insurance is the answer in helping you maintain your personal and financial independence.

Your AAA Insurance agency offers free seminars on long-term care, including no-obligation individual consultations as part of our service. We have several excellent companies that offer substantial discounts for qualified AAA members.

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Published in the February 2001 issue of the AAA Traveler.