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Business // Thinking Smart
David S. Chang

Consider Long-term Care Insurance

Editors’s note: For a slightly a different take on this important topic, see Dan Boylan’s column on Page 14.

With the average life expectancy of Americans at 77.8 years, the likelihood that we will need longterm care (LTC) has increased dramatically. In fact, more than half of us will spend part of our lives in situations that require some sort of LTC. Americans who reach age 65 will have a 40 percent chance of entering a nursing home. About 10 percent of the people who enter a nursing home will stay there five years or more. This year, about nine million Americans will need LTC; by 2030 it’s estimated to be above 20 million.

Unfortunately, LTC can be very expensive. In 2011, home care in Hawaii cost more than $50,000 and a nursing home cost more than $120,000 a year. These prices are expected to rise exponentially, therefore it is important to have a strategy to address the threat of LTC expenses.

Some choose to rely on family and friends for their LTC needs, while others plan to use their personal assets and savings. Both of these options may not be ideal. Also, Medicare and Medicaid will generally not pay for LTC unless you meet certain economic conditions, and it can be very difficult to get.

Buying LTC insurance is an excellent way to protect yourself from these expenses. If choosing this route, here are some steps to help you when shopping for LTC insurance:

1) Talk to a financial professional to make sure the product is right for you and your family. The adviser should be unbiased and help you shop around with different companies and plans. Don’t be pressured to make quick decisions and take your time to do your own homework.

2) Make sure the insurance company has a lot of experience in the LTC industry, at least 10 years or more.

3) Check the strength of the company and its ratings. Insurance companies are rated by various agencies such as A. M. Best, Moodys and Standard and Poors.

4) Make sure the policy covers a broad range of care: home care, adult day care, assisted living facilities, residential care facilities, respite care, hospice care and nursing homes.

5) Study the fine print and policy to see the limitations on the plan and what conditions need to be met to receive the benefits. Not all plans are equal and premiums are directly related to benefits such as the amount of benefit, inflation protection, waiting period and length of benefits.

6) Ask the companies how many times they have raised their rates on existing customers. It can be a red flag if they have done it several times the past few years.

7) Take time to do your own homework since different companies offer different types of benefits, riders and premium costs. Some products combine benefits such as life insurance and LTC.

8 ) Decide early enough where the premiums will be affordable. The longer you wait, the more expensive the policy. Also most companies require medical testing to determine suitability.

In some cases, your employer may offer LTC insurance. Be sure to check it out as it may have better premiums and benefits. LTC insurance should be an integral part of your financial plan. The right LTC product can give you the quality of life you need while giving your family emotional and financial stability for the future.

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