By AGIS Staff, AGIS Network
Long term care insurance is something that both baby boomers and their parents should consider even if they?re in their 60s and early 70s. If your parents are 80-plus, they will not likely qualify for any policies that at a reasonable cost.
Long term care insurance is rather new to the insurance scene. We're all used to life insurance, car insurance, and disability insurance (you might not realize it, but if you're working, Uncle Sam has you covered through Social Security). The whole deal with insurance is to protect yourself against a major loss that you can ill afford. Bottom line: You don't want to take the risk. Insurance companies know that lots of people are just like you. So they ask large numbers of people to pay a set amount of money (the more the better) and they'll take the risk for you. The more the risk is shared, the better off everyone is with the potential for lower premiums.
How Much Does Long Term Care Insurance Cost?
The problem right now with long term care insurance is that the numbers of people buying into it are still pretty small. In fact, less than 1 percent of all the money spent on long term care in this country is paid from a long term care policy! So, without a large base to spread the risk, the premiums are pretty high. Prices range from $3,000 to $8,000 per year, depending on the kinds of benefits you pick, how long a waiting period you choose before the benefits kick in, your age and how many years of coverage you choose.
Enter the chicken-and-the-egg game: Not until more people join up will the insurance premiums come down. Not until the premiums are lower will more people join up. In the meantime, the costs of long term care can bankrupt many American families. The average nursing home costs $50,000 per year. Can you handle $1,000 a week?
Why Buy Long Term Care Insurance?
When you think of it, the odds of needing nursing home care are a lot higher than losing your house to fire or
totaling your car. Yet, we don't think of being without car insurance or homeowners insurance. Why the hang-up over long term care insurance? Well that's not too hard to figure: Who likes to think about old age or nursing homes? Who likes buying insurance? Besides, when people do think about it, they assume that Medicare covers nursing homes or the state will pick up the tab. Wrong on the first count, and be destitute on the second count. On top of all this, you're feeling sandwiched: You?re busy putting money aside for your kid's college bills and your retirement while paying a mortgage, car loan, and just plain having a life. So what should you do? And what should your parents be doing when it comes to long term care insurance?
There are five major reasons why people buy long term care insurance:
- To maintain their independence so they won't have to rely on family members.
- To protect their assets against the high costs of long term care; to preserve their children's inheritance.
- To make long term care services affordable, such as home health care and custodial care.
- To provide themselves with more options than just nursing home care, and to pay for nursing home care if it's needed.
- To preserve their standard of living.
Finding a Long Term Care Insurance Policy. Focus on the Company
When researching an insurance company to provide long term care insurance (or any kind of insurance), the first thing you want to do is make sure the company is financially solid, with an excellent reputation in its service delivery. There are four rating companies that issue grades on insurance companies; A.M. Best is well known, as is Standard and Poor's. Don't take a policy with company that has lower than an A rating. Because long term care insurance is still a relatively new product, and because insurance companies are still guessing at how much it will really cost them to cover long term care, choose an insurance company that can absorb paying out more claims than it had forecasted. Rating directories of insurance companies are available online.