Long Term Care Insurance: A Primer and Review


Almost half of those reaching age 65 in any given year are expected to spend at least some time in a nursing home during the last years of their lives. With nursing home costs in Arizona averaging as much as $35,000 to $40,000 per year, few can afford sustained long term care costs. Medicaid, the federal program which has paid those costs for most patients, is likely to be extensively revamped (and curtailed) in this budget year.

All of that is the rationale for a tremendous growth in sales of long-term care insurance in recent years. While millions of Americans have purchased policies since they became widely available a decade ago, many are uncertain of the value of those policies.

In a rapidly-developing industry, the only completely predictable element is change. The most recent innovation is development of a long term care policy based on life insurance. With such a policy, the purchaser who never enters a nursing home will have left a substantial payment to beneficiaries at death, while providing coverage in the event that nursing home placement becomes necessary.

The principal drawback to life-insurance-based long term care policies is cost. Since the policy also includes a death benefit, it stands to reason that the expense will be higher.

Purchasers of long term care insurance (whether or not they are considering one of the new kinds of policies) should be alert to common shopping pitfalls:

  • Length of coverage–current Medicaid rules impose a three-year penalty on asset transfers by the applicant. If the purpose of insurance is to permit transfer of assets (to children, for example), then coverage should extend for more than the three-year period. Given upcoming changes and a desire for flexibility, the prudent purchaser should opt for five years of coverage.
  • Home care–any good policy should provide coverage for assistance in the home. One item to look out for: “Activities of Daily Living” should include ability to bathe oneself. Otherwise, someone with limited deficits may need assistance but fail to qualify for in-home help.
  • Inflation protection–nursing home care costs tend to increase faster than inflation. Some policies permit periodic purchase of increased protection. Some life-insurance based products rely on increased policy value to make up future differences between cost and benefit.

Elderly Suicide Rate Increases

The suicide rate among elderly Americans is rising after decades of decline. That’s the conclusion of a federal study released last week that cites depression, alcohol abuse, social isolation and physical illness as leading risk factors.

The Centers for Disease Control and Prevention said the suicide rate for those 65 and older increased by nine percent between 1980 and 1992. The suicide rate for the elderly had declined from the 1940s until 1980, when it began to increase, the CDC said. The biggest suicide rate increase occurred among the 80-to-84 age bracket, while the rate declined among adults aged 65 to 74.

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