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Why You Need Long-Term Care Insurance No one wants to consider themselves as future candidates for long-term care, but you can save your family time and money by preparing for it in advance.

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Q:I'm 45 years old and have an elderly father who requires dailyhome health care assistance. We've seen firsthand how quicklylong-term care costs can deplete retirement savings. What can I donow to keep this from happening to my wife and me as we getolder--so we don't put our kids under greater financial burdento support our care? I've heard about long-term care insurance.Should we be looking into it? Or, is it too early?

A:Actually, you're smart to begin thinking about long-term careat your age. In fact, according to the American Academy ofActuaries, 40 percent of those receiving long-term care are workingage adults ages 18 to 64 who've been put into that unfortunateposition by car or sporting accidents, MS, aneurysms, brain tumorsor strokes. At the very least, people need to seriously considerlong-term care insurance, as part of their overall financialplanning, by the time they reach 50.

What exactly is long-term care (LTC) insurance? While we'rehealthy, it's easy to take for granted the normal activities ofdaily living, such as getting out of bed, taking a shower,preparing and eating meals, and driving a car. However, when you ora loved one is stricken with a degenerative and chronic condition,performing even the most basic activities becomes impossiblewithout the assistance of another person.

Long-term care is not necessarily medical care, but ratherwhat's called "custodial care." Custodial careinvolves providing an individual assistance with activities ofdaily living or supervision of someone who is mentally impaired.LTC can be provided in many settings, including nursing homes, yourown home, assisted living facilities and adult day care.

The cost of long-term care can be very expensive. Home healthaides cost on average $65,700 per year. Nursing homes average$62,000 per year. So, LTC insurance is a proactive and oftenpractical means to cover the costs of care without burning throughyour retirement savings or becoming a greater financial and/oremotional burden on your spouse, children and grandchildren.

How much does LTC insurance typically cost? Premiums are basedon age, health and individual coverage choices. According to theLongTerm Care Insurance Buyer's Advocate Alliance, there aremore than 3,000 possible prices for each person. For example, a60-year-old applicant could get minimal coverage for about $60 permonth, while more comprehensive coverage can run as much as $12,000per year.

There are three major areas that affect cost:

  1. Daily or monthly benefit: How much do you want yourpolicy to pay per day or month for your care? This usually meanschoosing a daily benefit between $40 to $300 per day or a monthlybenefit between $1,000 and $8,000.
  2. Benefit period: How many years do you want your coverageto last? For example, two, three, four, five, six years or alifetime?
  3. Elimination period: This refers to the number of daysyou will pay for your own care before coverage kicks in. Waitingperiods of 100 days or less make sense for most people, whileshorter waiting periods like 20 to 30 days make more sense forpeople with less than $100,000 in assets.

Here are four factors to consider when selecting a long-termcare policy:

  1. Financial strength: Make sure the company you select isone that will be around when you need to receive benefits;otherwise, you risk losing your policy if the company you bought itfrom goes out of business. Look up ratings on the insurancecompanies in your local library. Consult resources like A.M.Best Book, Standard & Poor's, Moody's and Duff& Phelps. And look beyond the ratings. Find companies withbillions--not millions--in assets. Choosing companies with largerassets minimizes your risk of large rate increases.
  2. Sufficient daily benefit: LTC services are expensive,ranging from $130 to more than $200 per day, depending on where youlive. Ask your financial advisor about average long-term care costsin your area.
  3. Inflation protection: The cost of long-term careservices will increase over time. This is especially important toconsider when you have 20 to 30 years before you expect to receivebenefits.
  4. Comprehensive coverage: Choose a policy that gives youflexibility in how you receive long-term care services, whethernursing home, home care or adult day care.

When it comes to long-term care insurance, the younger you are,the better and the lower your premiums will be. Therefore, the timeto look into long-term care insurance is when you'rehealthy--not when you're sick and need it. Otherwise, you risknot qualifying for coverage and having to pay out-of-pocket for thecost of care.

For more information, consult these Web resources:, and

Phillip L. Pennartz, Ph.D., RFC, CSA, is a registeredprincipal with IFG Network Securities Inc. who helps individualsand business owners build and protect their wealth in the areas ofretirement planning, college funding programs, estate planning andlong-term care programs. IFG Network Securities is a registeredbroker/dealer and a member of the SIPC.

The opinions expressed in this column are thoseof the author, not of All answers are intended tobe general in nature, without regard to specific geographical areasor circumstances, and should only be relied upon after consultingan appropriate expert, such as an attorney oraccountant.

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