Protracted Care Insurance Important

The vast majority of Americans are not sufficiently prepared to face long-term care. They go through their lives reassuring themselves that they will probably never need it. Unfortunately, that’s simply not the case. A study by the U.S. Department of Health and Human Services indicates that people aged 65 face a 43 percent lifetime risk of entering a nursing home. About 21 percent may stay there five years or longer. According to the AARP, the average cost of this care is $56,000 per year. The odds that you will need some kind of long-term care increase as you age.

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Insurance Options for Extended Care

Self-Insurance as an Option

To self-insure — that is, to bear the cost yourself — you must have sufficient income to pay the estimated $56,000 or more per year for nursing-home costs. The cost of long-term care is not stable, however. It is rising with inflation and is expected to exceed $148,000 per year in the next 20 years. So even if you have the resources to afford a $56,000 yearly expense now, you may not be able to handle rising future costs without drastically altering your lifestyle.

Medicaid

Medicaid is a joint federal and state program that covers medical bills for the needy. If you qualify, it will pay for your long-term-care costs. Unfortunately, Medicaid is welfare. In order to qualify, you’ll have to spend down your assets.

State law determines the allowable income and resource limits. If you have even one dollar of income or assets in excess of these limits, you will not be eligible for Medicaid. To receive Medicaid assistance, you’ll have to transfer your assets to meet those limits. This can be tricky, however, because there are tough laws designed to discourage asset transfers for purposes of qualifying for Medicaid. If you have engaged in any "Medicaid planning", consult an advisor soon to discuss the new Medicaid rules.

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Long-Term-Care Insurance

A long-term-care insurance policy enables you to transfer a portion of the economic liability of long-term care to an insurance company in exchange for regular premiums. Long-term-care insurance can pay for skilled, intermediate, and custodial nursing care. Some policies even pay for home health care. It can protect your family from the potentially devastating cost of a long-term disability or chronic illness.

Long-Term-Care Riders on Life Insurance

A number of insurance companies have added long-term-care riders to several life insurance contracts. For an additional fee, these riders will provide a benefit — usually a percentage of the face value — to help cover the cost of long-term care.

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