Are you prepared to pay the bill?
Annual nursing home costs $55,000 or more¹

Americans are living longer, which means your chances of entering a nursing home during your lifetime are higher then ever before. More than half of the US population will require some type of long term care in their lifetimes.²

You face an even higher risk of needing long term care if you have a family history of arthritis, osteoporosis, Alzheimer’s disease, stroke or heart disease or other chronic and debilitating illnesses.

Nursing home care is expensive

With the average cost of nursing home care running at about $55,000 (higher in larger cities) a year or more, combined with the risk factors, it’s no surprise Americans are buying long term care insurance in record numbers.

Experts report the average cost of long term care can easily wipe out savings, especially since Medicare, HMOs and CHAMPUS/TRICARE rarely pay for nursing home stays.

Currently, nearly 50 percent of long term care bills are paid by the individuals needing the care or by their family members, not by insurance companies. This means individual savings are the largest source of payment for long term care.

The need for long term care protection

In the past, in extended families, such care might have been provided at home by a spouse or younger family member. Today, families are more dispersed. Your spouse or family may be willing, but physically or financially unable, to provide care at home for you.

If you have assets of $100,000 to $1 million, some financial analysts recommend you consider purchasing long term care insurance. Without it, you may have to rely on your own individual savings for an extended and expensive nursing home stay.

Even if you qualify for care through the Veterans Administration, there are no guarantees. Space is limited with more than one third of the veteran population age 65 and older and in need of such care. And first priority goes to people who need care because of service-related disabilities.

What to look for in a long term care plan

Choosing a long term care plan that fits your needs as well as your budget can be difficult. Experts recommend you purchase long term care insurance as early in life as you can. If you wait until you’re older to buy long term care protection, your rates may be astronomical or you may not qualify.

When selecting long term care protection, look for the following:

• The plan should pay benefits based on your inability to perform daily activities or if you’re cognitively impaired. It should also pay for various levels of care—whether you need skilled, intermediate or custodial care.
• No prior hospitalization stay should be required.
• Choice of waiting periods—if you can self-pay for the first three months, you can save on premiums.
• Choice in how long your benefits will be paid—a year, several years or unlimited time period.
• Daily benefit amount—a range of daily benefits should be offered so that you can insure for the average daily cost in your community, or for the portion your income will not cover.
• Nursing home coverage should be available along with additional protection options for home and community-based care.
• Stability and reputation of the insurance company.

You should also look for the availability of these extra features:

• Inflation Protection. This feature automatically increases your daily benefit each year by a specified amount.
• Benefit Upgrades. The plan allows you to purchase a higher daily benefit without having to complete another application or answer health questions.
• Guaranteed Renewability. This means your rates may increase for all people in your age group, but your coverage can never be canceled as long as you pay your premiums.
• Waiver of Premium. This allows you to stop paying your premiums after you have collected benefits for a specified period.

Insurance for long term care may be a definite need depending on your financial conditions. If you decide to buy a long term care policy, carefully evaluate all your options and compare a number of plans for the best one to fit your budget and lifestyle.

The Minnesota State Bar Association sponsors a high-quality, affordable Long Term Care Program. For more information on that or MSBA’s other sponsored plans, call toll-free 1-800-501-5667.

1Savage, Terry. “Prepare for the unthinkable: long-term care.” <http://moneycentral.msn.com>. Viewed 03/12/02.
2Americans for Long-Term Care Security. <www.ltcweb.org>. Viewed 03/12/02.