August 5, 2005
Only 10 percent of people over 65 own long-term-care insurance policies while others say they are intimidated by high costs and the bewildering array of benefit levels, deductible periods and other features, says the New York Times.
These policies protect against improbable events and require a lifetime commitment to one insurer; the good news is that many policies now cover home care, assisted living, respite care and hospice care.
But studies show that only a small percentage of policyholders need care for long periods -- four years or more -- so specialists are recommending policies for which the holder pays a larger share of the costs:
- People with a net worth of $1 million to $1.5 million, not including the family home, could probably self-insure.
- Those with a net worth of less than $250,000 may not have enough liquid assets to warrant years of premiums, so they could receive benefits from state Medicaid programs.
- People in the middle could integrate their insurance with other assets and buy a lower-premium policy that would entail some direct costs.
Additionally, other studies show that most policyholders make claims for short periods of time.
- Only 3.6 percent of claims were for care that lasted for four years and 4.3 percent were for more than five years.
- In 76.7 percent of claims, care lasted less than two years.
- About a third of all policyholders had policies that provided benefits for seven years to a lifetime.
Shorter benefit periods make sense in the four states that offer so-called "partnership policies" that shelter a limited amount of assets, and there are alternatives for married couples, such as joint benefits. Buyers can also save by opting for a longer deductible.
Though the one place not to skimp is inflation protection; only 40 percent of new policyholders buy such protection, says the Times.
Source: Susan B. Garland, "Long-Term-Care Insurance: How Much Is Too Much?" New York Times, July 24, 2005.
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