Monday, July 19, 2004

Long-term: Do your research before buying insurance


Long-term care insurance helps some protect assets

By Ted Griffith
The (Wilmington, Del.) News Journal

Like many older Americans, Adele Labudovich worried about how she would pay for nursing home care if she ever needed it. Her concerns became acute following her husband's death 11 years ago.

"I didn't want to be a burden on my children," the 77-year-old said.

After talking it over with a financial planner, she settled on a solution: long-term care insurance. The policy would pay for care either in her home or in a nursing home.

SHOPPING FOR POLICY?
Consider these tips

Once you decide to buy long-term care insurance, consider this advice from financial planners, insurance brokers and the Delaware Department of Health and Social Services before choosing your policy:

• Make sure the long-term care insurance policy makes a provision for inflation. Policies can, for example, provide for a 5 percent annual increase in the amount paid for care.

• Buy from insurance companies with high ratings for financial stability. Ratings are available from A.M. Best, Standard & Poor's, Moody's and others.

• Get quotes from at least three different insurance companies.

• Make sure the policy provides sufficient coverage for home care if your preference is to stay at home.

• Learn the cost of getting care at home, in nursing homes and in assisted-living facilities in your state as well as states you are considering retiring to. Knowing how much care costs is vital to determining how much insurance coverage you will need.

"For me it has been worth it," said Labudovich, who lives in Chesapeake, Va., near her two children. "I hope I never need it, but I have peace of mind knowing that I have it."

The cost of a stay in a nursing home quickly can deplete most any family's savings. "You can end up running through $60,000 or $70,000 a year if you don't have this protection for your assets," said Daniel Sullivan, an insurance broker with Peninsula Financial in Georgetown, Del.

For people hoping to avoid having their assets swallowed by nursing home expenses, long-term care insurance can offer a solution.

In addition to nursing home care, long-term care insurance generally pays for care at home or in an assisted-living facility.

However, long-term care insurance isn't for everyone, financial planners and insurance brokers caution. People need to do thorough research before deciding to buy a policy.

"This is one of those gray areas," said Vincent Schiavi, a Wilmington, Del., financial planner. "The answer really depends on the individual's circumstances."

In some cases, people may not be able to afford long-term care insurance. The cost varies depending on age and other factors, but it tends to be expensive. A couple in their 60s could easily spend $4,000 a year for the insurance. Prospective buyers need to make sure they will have enough money to keep up with payments; otherwise their policies will lapse.

The National Council on the Aging, a Washington-based nonprofit group, recommends people buy long-term care insurance only if their assets, excluding home and car, exceed $75,000 and their annual retirement income is at least $25,000. People with limited incomes would likely quickly qualify for Medicaid in the event they went into a nursing home, experts said. Medicaid, a state-federal program, will pay for nursing home care if a person meets certain low-income criteria.

Buyers can cut the cost of long-term care insurance by buying at a younger age. But often other priorities, such as saving for retirement, keep people from getting the insurance until they are well into their 60s. The average age of a person buying a policy is 65, according to the National Association of Insurance Commissioners.

"It can be difficult to get the attention of people when they are 50, or even 60," said Laura Wooster, a marketing director with John Hancock Insurance, one of the major providers of long-term care insurance. "But long-term care insurance is not something that you can generally wait to buy until you are 80 or 90."




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