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Finances Q&A: Long Term Care Insurance

  • Deborah Nayrocker Crosswalk.com Contributing Writer
  • 2012 10 Oct
  • COMMENTS
Finances Q&A: Long Term Care Insurance

Dear Deborah,

My husband and I are both 45 and have two young sons (ages 9 and 10). I am a stay-at-home mother and my husband is a mid-level engineering executive. We’ve been hearing that we should have long-term care insurance and AFLAC but I don’t know if it’s a wise choice. We are paying off debt and building emergency savings right now.

Any advice on how or if we should prioritize long-term care insurance or AFLAC?

Some insurance decisions are easier than others. For instance, life insurance offers a protective cushion for your family by helping to replace income. It helps ensure a family’s financial well-being, offering financial security during a difficult time. 

Today more employers want to minimize involvement in their employees’ health care. So some companies offer optional insurance services that are employee-paid and available on a voluntary basis. 

Families must determine whether they are candidates for long-term care (LTC) insurance. Its purpose is to protect your assets should you need nursing home, assisted living or home care. Wealth strategists generally recommend buying a policy five to ten years before retirement.

Is it affordable? Premium costs vary depending on your age, benefits purchased and your residential state, costing several thousand dollars a year. The National Association of Insurance Commissioners (NAIC) recommends that families should not spend more than 7 percent of their income on premiums.

Premiums are not set in stone. It’s likely there will be rate increases. So if you are on a fixed income later and unable to continue paying, you can lose your coverage and everything paid into it. 

Can LTC insurers turn down applicants? NextGen Advisor Brian Peterson states that people who currently use a walker or wheelchair, or who have schizophrenia or dementia won’t even be considered for long-term care insurance. 

A MetLife information resource states that long-term care services are paid in basically three ways: 1) self-insurance 2) Medicaid and 3) long-term care insurance.

By self-insuring, you are saving money or have enough funds to pay privately for necessary expenses.

Medicaid is a federal and state government program for low-income people. Medicaid funds are also used when assets are low. This program has precise asset and income guidelines in order to attain eligibility, and eligibility criteria vary from state to state.

Long-term care insurance (LTC) helps you keep your assets and income for your retirement needs. It helps to preserve your estate when you have a prolonged illness or disability. These funds pay for assisted living, nursing home or home care should you be unable to take care of yourself. Long-term care insurance is not the same as medical insurance, which covers hospital costs and doctor visits.

LTC insurance policies are sold on an individual basis. They may also be available through employers during an initial enrollment period. The younger you are, the lower your premiums will be. 

Some factors affecting the cost of LTC policies are your age, the type of policy (basic vs. one with many features), the total amount of coverage available and inflation protection. The most common policy is the reimbursement policy, or “expense-incurred policy.” Benefits are paid to the provider or you, when you are eligible for benefits.  

Is long-term care insurance right for you? Be sure to get a rock-solid insurer and make sure benefits will actually be paid. Do the research. The New York Times and other newspapers have documented seniors’ complaints of troubles collecting claims. Insurance options can be checked out at the NAIC Web site

AFLAC is not a health insurance company. Instead, it helps pay expenses that major medical doesn’t cover. It offers supplemental insurance products such as accident, cancer  or specified disease. Group coverage and individual coverage is available. 

AFLAC is optional. Dollars spent on supplemental insurance could instead go toward a health savings account (HSA). You can put your pretax money into a health savings account to be withdrawn for certain medical expenses. To qualify for this account, you need a high-deductible health insurance plan. 

Copyright 2012 Deborah Nayrocker. All rights reserved. Permission to reprint required.

Deborah Nayrocker writes on personal money management topics, showing others how to take control of their financial future. An award-winning writer and columnist, she is the author of The Art of Debt-Free Living and Living a Balanced Financial Life. Her Web site is www.ArtofDebt-FreeLiving.com.

Publication date: October 29, 2012