Do You Need Long-Term Care Insurance?

Ethan Ewing | November 04, 2010If you are like many military service members, you have instituted a long-term savings plans to tackle accepted later life expenses such as college tuition and/or retirement. What many people -- civilians and military personnel alike -- fail to consider is the need for long-term care.

Long-term care can include a wide range of medical and support services for those who are disabled or infirm. It is easy to put off this topic by claiming that you are young, strong or unlikely to find yourself in need of such support. But long-term care is a fact of life -- and sometimes sooner rather than later. The numbers are sobering and sometimes staggering:

1. More than nine million people over the age of 65 will need long-term care. By 2020, that number increases to 12 million. (1)
2. Average long-term care is 2.5 years, but roughly 30 percent of people need it for more than five years. (2)
3. The average daily rate in 2008 for a semiprivate room was $191. That is almost $70,000 a year. (3)

ItÂ’s important to realize that long-term care doesnÂ’t always have to happen at a nursing facility or only to the elderly. Often, older individuals are cared for at home by a family number. Even in this scenario, the costs -- both emotional and monetary -- can accumulate quickly. And on-the-job or in-service injuries can lead to a need for long-term care much sooner than expected in life.

So how do you protect yourself and plan accordingly? One option is Long-Term Care Insurance (LTCI). This provides coverage for services related to long-term care needs, including in-home services provided by loved ones. Typically, it pays a specified daily amount for nursing home care, in-home service or similar support for a specified number of years or even the individualÂ’s lifetime.

Like with any insurance, there are positives and negatives that each potential policyholder must consider. Specific to LTCI, it also matters when you initiate coverage. Is it worth it to buy at a younger age when premiums are less, but youÂ’ll be paying into the insurance for longer? Or should you hedge your bets on a disability while young, but face higher premiums later in life? You can also buy a policy that will only cover a specific number years of payments versus an entire lifetime of care. There are obviously risks in balancing the short-term financial benefits versus long-term financial exposure.

The simple math shows that it makes sense to at least consider LTCI. At $70,000 a year and an average stay of 2.5 years, an out-of-pocket medical bill of $175,000 is more than enough to significantly dent your military retirement fund. Considering that the cost of medical care will only increase, it is a safe bet that these costs will be exponentially greater when you reach your 65th birthday.

According to the American Association for Long-Term care Insurance, a single 55 year-old purchasing 3 years of coverage at a daily $100 maximum will pay $1,060 per year in premiums. For a 65 year-old, that premium jumps to $2,028. At this point, it makes sense to consider your personal health as well as your family history. By purchasing early, you will save almost $1,000 a month but you will also pay 10 years of additional premiums.

Some critics of LTCI say it is unnecessary at any age; that a smart retirement and personal savings program can account for later in life long-term care needs. If you can be diligent and aggressive enough in your savings to account for two to three years of potential costs at that level, then it is certainly worth considering avoiding LTCI. In that scenario, if you never need long-term care then you would maintain ownership of money that otherwise would have been paid into a premium.

Regardless of your choice, every individual should at least weigh the numbers and consider LTCI. Military members who pursue LTCI are fortunate in that they have access to a federally sponsored insurance program called Federal Long Term Care Insurance Program. It is the largest group long-term care insurance program in the country. Created in 2000 by federal law and administered jointly by John Hancock Life Insurance Company and Metropolitan Life Insurance Company, the program covers nursing home care, home health care, assisted living facilities, and adult day care.

Like any insurance program, individuals must qualify for coverage -- but undocumented estimates claim that nearly two out of three retirees who apply are accepted. You can find more information on FLTCIP at http://www.opm.gov/insure/ltc/. Be sure to research it carefully and obtain plan estimates from multiple insurance providers to make sure you are receiving the best deal possible.

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(1) US Department of Health and Human Services
(2) Joint study conducted by Penn State, Georgetown and Lewin Group
(3) MetLife Mature Market InstituteÂ’s annual survey of nursing homes



Copyright 2011 Ethan Ewing. All opinions expressed in this article are the author's and do not necessarily reflect those of Military.com.