Posts Tagged ‘benefit amount’

Need and Cost of Long-Term Care

With the average life span of Americans continuing to grow, the likelihood that one will need long term care can also be expected to increase. Today monthly nursing home costs average $5,900 a month or around $60,000 to $70,000 a year, or more. While long-term care services at home may be significantly less costly, these still average around $1,600 a month.

You can view a table of average nursing home care costs by state at www.getfinancialadvice.com/Nursing-home-costs-2008.html but keep in mind that costs can vary greatly even within a city and you may not know where you will be living when you need long term care.

Long-Term Care Insurance

A long-term care (LTC) policy may help you cover the cost of long-term care, allow you to retain greater independence, and provide relief to your children from the economic, physical, and emotional stresses associated with caring for an aged and/or ill parent. However, a LTC policy can be somewhat complicated. Below are some questions you will want to ask if you are thinking about purhasing a policy.

  1. Services Covered
    In addition to skilled nursing home stays does the policy cover assisted living, adult day care, in-home care, or a combination of these services?
  2. Benefit Amount
    What is the maximum cost per day that the policy will cover and for how long? Is there a maximum lifetime limit?
  3. Eligibility
    How does the policy define eligibility? Generally a health practitioner such as a doctor, nurse, or a social worker must declare one eligible for long-term care assistance. The policy definition of benefit eligibility however will stipulate how much assistance must be necesary for someone to qualify for the benefit. Usually one will qualify if they cannot do two or more activities of daily living, such as bathing, dressing, toileting, eating and moving in and out of a bed or chair, however the qualification may differ depending upon what levels of care are provided for in the policy. A cognitive impairment such as Alzheimer’s disease may also qualify one for long-term care.
  4. Length of Benefit and Waiting Period
    Usually the length of benefit and the waiting period are chosen by the policy owner when purchasing the policy and will determine the cost of the policy. Generally, 3 to 5 years is the common choice, for length of benefit, although if you are concerned about Alzheimer’s or other dementia you may consider greater coverage. A 60 day waiting period before benefits begin is also the standard, however you may select a longer or shorter waiting period or even no waiting period although this may increase your premium significantly.
  5. Insurer
    Who is the insurer and how is rated? Make sure the insurer is licensed to sell LTC insurance in your state and that it has a strong financial rating and a good reputation of service.
  6. Tax-Qualified
    Is the policy tax-qualified? If so, then you may be able to take the premiums off as a deductible on your taxes?

    In my next blog, we’ll take a look at the cost of LTC insurance and look a little more at some of the options available.

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You know you need life insurance, but how do you know which one is right for you?

Here are just a few scenarios when term life insurance may be the better choice…

  1. You want to pay as little as possible while ensuring that your family may stay in the same home without the expense of mortgage payments.
    • Buy a Decreasing Term Life policy otherwise known as Mortgage Insurance.

      As the amount due on your home decreases so does the benefit amount payable by the policy. (Not to be confused with PMI which is mortgage protection for the mortgage company in case you default on your mortgage. This is usually required if you owe more than 80% of the value of your home.)

      Note: Decreasing Term refers to the decreasing benefit amount not to the payments. Most policies are offered on a level-premium basis.

  2. You want to make sure your family is taken care of until your children have finished college.
  3. You can’t afford whole life and just want enough coverage until you can afford a permanent policy.
    • Get a short-term policy and if possible one that includes the Option to Renew or the Option to Convert or both. These options will increase your premium but they also ensure that you cannot be turned down from continuing your policy in the future even if you are uninsurable.

      This does not however prevent the insurance company from increasing your premiums nor does it limit the premium amount that may be charged, although the company may not charge you any more than they charge everyone else in your age group.

  4. You have other means of saving and just want to pay for life insurance only.
    • Purchase a term policy that should be long enough to cover you for your entire life.
  5. You want a certain benefit amount and coverage now but cannot afford the premiums of a level-premium policy. However you expect to earn more in the future.
    • Buy a 10-year renewable term policy that may be renewed every 10 years. Your premiums will increase every 10 years according to your age but you will have enjoyed a higher amount of coverage in your early years then you could normally afford.

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