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Long-Term Plan

11 June 2012 No Comment

USAA Magazine

When USAA member Lynn Whitener thinks about getting older, she imagines relying on in-home care. She doesn’t want to live in a nursing home. And she doesn’t want to ask her son to take care of her.

“I wanted someone to take care of me so my son won’t have to do that caregiving role,” she says.
Whitener, 60, a single teacher whose son is 21, joins the growing number of Americans turning to long-term-care insurance. These policies pay for people to assist you in a nursing home, an assisted living facility or even in your home.

Who It Helps
Single women and couples without children seek these policies. But couples with kids can also benefit if they don’t want to rely on grown children for care.

“America has families spread out across the country,” says Candace Bahr of the Women’s Institute for Financial Education. “That’s one of the reasons why long-term-care insurance is an important part of financial planning.” The other big reality: Health care costs can devastate finances.

Debra Newman, president of an insurance brokerage specializing in long-term-care insurance, expresses a tough reality: “If you say, ‘I don’t have a long-term plan,’ yes, you do. Your future 88-year-old wife is your plan, or your 40-year-old granddaughter. Somebody is going to have to deal with your health care costs and caregiving needs, because you don’t have a plan. Because otherwise, they are the plan.”

What to Consider
  1. Monthly benefit — Determine how much you’ll need based on care options in your region.
  2. Elimination period — Know how long you can afford to pay for expenses prior to the policy kicking in.
  3. Duration — Determine how many years you think you’ll need the coverage to last.
  4. Inflation protection — Make sure benefit keeps up with inflation.

 

How It Works
Premiums range from under $100 a month for healthy people in their 40s to over $400 a month for someone in their 60s with an existing medical condition. Payouts can range from $3,000 to $6,000 a month.

One month of care could easily cost more than a year’s worth of insurance. Indeed, without enough savings and investment income, the cost of care can wipe out a nest egg, or even equity in a home. Consider these national average annual costs of care, as reported in the 2008 Genworth Cost of Care Survey:

Home Care (non-certified home health aide): $42,328
Assisted Living Facility(private one bedroom): $33,093
Nursing Home(semiprivate room): $66,850
Nursing Home(private room): $74,208

When to Purchase
If you’re in your 40s, you can often make the purchase at lower rates, but prices rise if you’re 60 and older, so consider getting coverage in your 50s.

“Everyone might not need long-term care insurance,” Newman adds. “But everybody needs to have a discussion about how their family is going to deal with long-term care.”

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