Long Term Care Insurance: Yea or Nay?

Long term care insurance coverage simply MUST be considered by everybody who can medically qualify for this important coverage.

Why? For starters here are 10 good reasons:

1. The odds: The odds of your needing long term care are overwhelming: The odds of requiring long term care in your lifetime have now risen to 70 percent. That means that seven out of 10 Americans will use their policies - This is a far greater risk than an auto accident or a house fire. Most people wouldn't even consider being without homeowners and auto insurance, but there are far too many people who are not yet protected with long term care insurance.

2. Longevity: Folks are living longer. There are now more people over the age of 100 than any other time in history. Yet, we still have no cure for Alzheimer's, Parkinson's disease, Multiple Sclerosis or many other illnesses that can cause a need for long term care.

3. Independence: No parent wants to ever be a burden on their kids, especially if their kids are raising their own children. Baby boomers are called the sandwich generation because many are caring for an elderly parent with medical needs while putting a child or children through college. But most retirees want to remain independent as long as they can, even when it comes to such simple things such as driving themselves to doctor appointments and to the store.

4. Spend down: You run the risk of having to spend down your entire life savings for long term care needs before you die, leaving nothing to your heirs or worse yet, to your surviving spouse.

The most common governmental benefit is provided by Medicaid, and a married couple can have approximately $100,000 in savings while still qualifing for nursing home benefits through Medicaid. But a single person has to spend his savings down to $2,000 before he is eligible for those same benefits.

Even so, most parents would like to leave something to their family, even if it is just the value of their home for their survivors to sell and split the proceeds. Every generation feels that leaving a legacy is important, even if their children are already successful.

5. New statistics: Even though long term care is associated with seniors and retirees, Unum, a major LTC insurance carrier, reports that in 2006 almost 58 percent of LTCi claims were for people under the age of 65. The average claim for this age group lasted a year or longer. Unum's analysis showed that 30 percent were cancer claims, and more than 10 percent were claims resulting from strokes. Other leading sources for claims included neurological disease, dementia and multiple sclerosis. These data underline the fact that the younger someone is when they apply for LTCi coverage, the better.

6. Underwriting changes: Over the last forty years, insurance companies have found that many policyholders who purchased LTC coverage have kept these policies in force longer than insurers anticipated. In the past, many insurers priced their plans anticipating that a certain amount of policies would lapse, which would lead to extra profit for the company. But when the number of lapsed policies was less than expected, claims increased, forcing them to re-evaluate their underwriting guidelines.

7. Government encouragement: Federal and state governments are now pushing hard for people to purchase their own long term care policies. Obviously, if more people purchase long term care insurance, fewer people will tap into the Medicaid and welfare programs that are jointly funded by the federal and state governments.

Their strategy is three-fold: First, they have made it tougher to qualify for Medicaid. Strategies that elder law attorneys and certified estate planners were able to recommend in the past are now against the law. Second, some states promote co-op programs to encourage citizens to purchase long term care policies. In most cases, whatever the value that the policy would pay would be matched by the state in free, future, LTC benefits. Most states have a cap on benefits, but needless to say, it is a good value for the resident. Last but not least, tax-qualified long term care policies are tax deductible.

8. Legal changes: Again, the federal government and some states have now changed the rules on what Medicaid applicants can legally do to qualify for benefits. One of the major changes on February 2, 2006 was the enactment of the DRA (Deficit Reduction Act) of 2005. This extended "look-back periods" for gifting to five years from three years. Also on gifting, whether money or property - the penalty calculation would be figured from the date of application for Medicaid instead of from the date of the gift. Another difference pertains to the usage of life estate survivorship deeds. The law now treats these as if the gift never took place for Medicaid eligibility.

9. Estate recovery: If one needs Medicaid for their long term care needs, 49 out of 50 states now have laws to place a lien against the equity in one's home, so that when the Medicaid patient and their spouse, if applicable, pass away, the state will require repayment for the money they contributed toward their health care. And there goes any anticipated inheritance.

10. Health care flexibility: Home health care is by far one of the most popular settings for care. If at all possible, folks want to stay within the confines of their own home where they are comfortable versus living in an an institutional setting. With good home health care benefits available in most long term care policies, this choice can become a reality. We have seen folks use the home health care benefit of their policy to get a sitter or a home health aid to help them with their activities of daily living. Some of the more common illnesses were Alzheimer's disease, cancer, strokes, and stability and mobility issues.

With these reasons alone, you can easily justify long term care insurance for your future financial freedom and independence. It's prudent to gather as much information on statistics, laws and insurance in order to truly be prepared.