The point of buying long-term care insurance is so you don't have to worry how to pay for a nursing home (or other types of l...Read more
A 'Low-Frills' Long-Term Care Insurance Policy May Be Better Bet
- July 28th, 2005
When it comes to long-term care insurance, many people are intimidated by high costs and the bewildering array of benefit levels, deductible periods and other features, according to a recent article in The New York Times that examines the low popularity of this insurance.
In fact, only 10 percent of people over 65 own policies. Long-term care coverage often requires a lifetime commitment to one insurer; premiums can rise sharply if the policyholder switches, and policyholders can pay premiums for decades with no way to predict if their coverage is what they will need.
The article suggests that a lesser-frills policy, though still costly, may provide a more attractive safety net for many risk-averse elderly people.
For example, a new study shows that only a small percentage of policyholders need long-term care for long periods -- four years or more. The study, released in April, found that only 3.6 percent of claims filed for nursing home, assisted living and home services were for care that lasted four to five years, and 4.3 percent were for care lasting more than five years. In 76.7 percent of claims, care lasted less than two years.
So a growing number of specialists recommend more modest policies for which the policyholder pays a bigger share of the costs.
"Some insurance agents still strongly believe that people should buy the maximum possible for a policy to be worthwhile," said Dawn Helwig, a principal of Milliman Inc., and co-author of the study on insurance claims. "But those policies are very expensive. It puts you into the Cadillac market all the time, and a lot of Chevy owners are missed."
"I would go for four or five years of coverage, but for someone who has limited income and assets, three years should be satisfactory," Helwig said.
Also, the article points out that not everyone needs long-term-care insurance. People with a net worth of $1 million to $1.5 million, not including the family home, could pay the cost out of their pocket, said John E. Ryan of Ryan Insurance Strategy Consultants in Greenwood Village, Colorado.
At the other extreme, those with a net worth of less than $250,000 may not have enough liquid assets to warrant paying premiums for years, Ryan said. They may be better off receiving benefits from state Medicaid programs.
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