COLUMN:

The Lowdown on Long-Term

Contrary to popular belief, long-term care does not necessarily mean con-finement in a nursing home. Rather, it refers to the daily care that’s needed over a prolonged period for a person who suffers from chronic illness or cognitive impairment.

In fact, 80 percent of long-term care claims are for services in the home. This means long-term care insurance policies can provide money to pay for someone to help handle housecleaning, laundry, cooking and hygiene for the insured. Some policies cover the installation of ramps, handrails and other home modifications.

You are eligible for benefits if you can’t do two of the five activities of daily living: bathing, dressing, feeding yourself, going to the toilet, or getting in or out of bed or a seated position under your own power. The most comprehensive policies also cover clients suffering from cognitive impairment (dementia or Alzheimer’s disease).

The average cost for “at-home care” in Hawaii is $49,230 per year compared to $86,917 per year for nursing home care. With six of 10 people needing some assistance in their golden years, how will you pay for long-term care should you need it?

Many people feel long-term care insurance is a safety net that protects their assets, independence and loved ones. Most don’t want to be a burden on their family, depend on Medicare or Medicaid, or deplete their life’s savings to pay for nursing home expenses. They want the freedom to choose and pay for the services they prefer, and they want peace of mind, knowing their estate will be left intact for their heirs.

In addition to providing support services, some policies include the services of a “care coordinator” who works closely with clients, their family and doctor to ensure the process runs smoothly. In addition to helping file claims, the advisor plays an important supportive role.

The cost of long-term care policies depends on various factors such as age, elimination period (number of deductible days before the policy pays), amount of monthly benefit, length of benefit and optional riders. The younger you are, the cheaper the cost and the easier it will be for you to qualify for coverage.

Your benefit may range from $50 to $500 per day. The length of time the benefit is to be paid can run from three years to lifetime. Among the optional riders are inflation, shared care and survivorship. Inflation means the benefit automatically increases about 5 percent annually. Inflation is recommended due to the rising cost of medical services.

Shared care refers to a single benefit amount that’s shared by two parties. For example, if the policy pays $5,000 a month over a six-year period and the husband uses two years of benefits, the wife has access to the remaining four years of coverage. This generally is cheaper than buying two separate policies.

The survivorship rider involves two policies with equal benefits. For example, a husband and wife buy two policies with lifetime benefits. With this rider, when a spouse passes away, the surviving spouse’s policy becomes fully paid.

The cost of long-term care should be measured by a break-even analysis. Say you’re 57 years old and in good health. A $150 daily benefit for a five-year period comes out to $273,650. Your premium cost would be $111 per month. If you paid premiums for 10 years ($13,320), it would take just 2.9 months of benefits for you to break even (based upon the $4,500 per month that you’d be receiving in benefits).

Once you obtain your policy, the premium is designed to stay level for the rest of your life, however, if you wait until age 67 to get the same policy, your cost would be $340 per month. Also, as you get older and are more prone to diseases and accidents, it becomes harder to qualify. Insurance companies will not issue policies when there may be a pending claim around the corner.
Long-term care premiums can be tax-deductible. Also, insurance companies offer various discounts. The most common ones are: Couples applying together (20 to 40 percent), you’re in great health (10 percent) and employer-sponsored programs (5 to 10 percent).

Be wary of insurance carriers offering programs that are priced substantially below the benchmark set by top companies such as John Hancock, GE, Met-Life, Prudential and Unum Provident. If a plan is too good to be true, it probably isn’t. n

Cole Imai is a Chartered Life Underwriter and Registered Health Underwriter. He has been an insurance professional for over 22 years and has specialized in long-term care for over 12 years. Contact him at 226-1551 or via e-mail at imaic002@hawaii.rr.com.

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