June 01, 2004


 The benefit of the future

 A short discussion on long-term care insurance

Posted May 15, 2004

Which type of insurance are policyholders most likely to use during their lifetime—auto, fire, or long-term care insurance?

Fortunately, the odds of filing a car insurance claim are only one in 240. A mere one in 1,200 homeowners ever files a fire insurance claim. Still, people sleep better knowing they're covered against an unlikely catastrophe.

So, here's a fact that might keep a person up at night: One in two individuals with long-term care insurance will use it, according to Suze Orman in "The 9 Steps to Financial Freedom."

More than 22 million American households are already involved in caregiving, and that number is steadily growing. Yet, remarkably few have prepared for the expense of long-term care by insuring against it. And it is expensive.

The average nursing home stay costs close to $56,000 a year, according to the AARP. Hiring an aide to come into one's home for a few hours, three times a week, could easily cost a thousand dollars a month.

Health insurance doesn't cover those costs. Medicare support is limited, and Medicaid takes over only after most of one's assets are depleted.

For those who think long-term care is something only the elderly need to worry about, take note: Two out of every five Americans receiving long-term care are under the age of 65, according to the Health Insurance Association of America.

In addition to the financial pressures of the cost of long-term care, caregivers often have to balance the demands of career and family. This is of special concern to women, because the burden of caregiving falls disproportionately upon them. In 1997, the Journal of the American Society of Chartered Life Underwriters and Chartered Financial Consultants reported that 72 percent of the nation's caregivers are women, caring for a frail or ill spouse, aging parent, or other relative. Because many such women continue to work outside the home, the strain of balancing both loads can create a tremendous emotional and financial burden. A 1997 article in Broker World estimated productivity losses from elder care to exceed $29 billion nationwide.

The need for long-term care insurance may arise from an injury, an illness, advancing age, or a cognitive impairment disease such as Alzheimer's disease or dementia. Long-term care means that an individual needs help with the activities of daily living, such as bathing, dressing, and eating.

The care may be provided at home or in a facility. Professionals typically provide the care, but some policies allow friends or family members to be the caregivers.

Long-term care insurance is a benefit more and more Americans are beginning to consider as a way to responsibly plan for future needs. It offers families a way to preserve independence and wealth, and provides the means to help one manage caregiving responsibilities while remaining productive at work.

The government has also provided some tax incentives for incorporating long-term care insurance into a benefit portfolio. Self-employed individuals, including partners and some S Corporation shareholders, may be able to deduct a percentage of eligible long-term care premiums. (Consult a tax professional.)

Another smart option is to fund long-term care insurance through a Health Savings Account. This, in effect, allows a person to pay premiums with pretax dollars.

Long-term care is expected to become one of the most important and sought-after benefits in the coming years. AVMA members and their families are eligible for a discount on this important insurance benefit from the AVMA GHLIT. To learn more about how this insurance or a Health Savings Account can provide valuable protection, contact the AVMA Group Health and Life Insurance Trust at (800) 621-6360, prompt 3.