We are all living longer. As we age the probability of needing extended medical care increases. A long term illness or disability may require a stay in a nursing home. Nationally a year’s stay in a nursing home could easily cost $40,000 to $80,000. In South Carolina as of September 2005, a semiprivate room is $140.00 a day or $51,100 a year.
How will you pay for extended healthcare? Long term care is not usually covered by an employer’s health insurance plan. Medicare and Medicare supplements limit coverage and eligibility. Medicaid pays only after all savings and assets are depleted to $2000, with certain exceptions..
Funding a potential long term illness or disability without depleting your savings and investments can be done in many ways. Its best to start planning for this event around age 50 or about 20 years before long term care might be needed. After your plan is in place it is best to review it every 5 years or when significant changes in the law take place.
One key component to the plan should be long term care insurance. The main reason for starting early is that you have more options and the premiums are lower. A long term care policy can help you remain in control of your choices; such as home care, a setting of your choice, and how to pay for care professionals.
Things to look for in a long term care policy are:
- guaranteed renewable – no future medical exams
- benefit triggers –what lets the policy start paying for care.
- home healthcare coverage – make sure the policy will allow you to have home care before needing to institutionalized
- definition of nursing care –ensures that coverage is provided whether the nursing home you use is classified as skilled, intermediate, care, respite, or custodial
- inflation riders – how are future price increases handled in the policy.
- linked benefits –what happens to the money if I do not need long term care. Some policies have life insurance attached. Future policies may be annuity based.
- discounts for good health and spousal policies
- flexible waiting & benefit periods that meet your needs.
Policies are priced with the following considerations:
- Age - the younger you are, the lower the premiums
- Benefit period – 3 years, 5 years, and life. The shorter the period, the cheaper the policy.
- Benefit amount – the higher daily benefit, the higher the premium
- Inflation – the higher the assumed rate of inflation, the higher the policy
- Waiting period – typically 20 to100 days. The longer the period the lower the price.
With proper planning long term care’s devastating cost to personal and family assets can be avoided. As always, people do not plan to fail, they just fail to plan.
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