MONEY: Long-Term Care

BY BARBARA BALLINGER

Rest assured
Your future: Hope for the best but plan for the worst.

Carol Lee Cikanek, ABR®, a 16-year veteran salesperson with Coldwell Banker Residential Brokerage in Hinsdale, Ill., consistently sells more than $30 million a year in real estate, she says. So for her, it’s difficult to imagine a scenario in which she’d be unable to care for herself because of a catastrophic illness or accident.

Yet, as an independent contractor responsible for her own financial welfare, Cikanek also knows that discounting worst-case scenarios is as Pollyannaish as believing the Easter Bunny will deliver a basket of chocolates this month.

“Last year, I decided to look into all aspects of financial planning. I asked myself, ‘Who’ll take care of me if I get sick and have to stop working?’” she says. Her answer: Long-term care insurance.

Cikanek is smart to take action while she’s healthy. About 9.4 million Americans over age 18 annually require long-term care because they can’t perform daily living activities, according to the most recent data available from the Agency for Healthcare Research and Quality, part of the U.S. Department of Health and Human Services.

But most aren’t as prescient as Cikanek. “Fewer than 10 percent of seniors have purchased LTC insurance, and few baby boomers have,” says Stephen A. Moses, president of the nonprofit Center for Long-Term Care Financing in Seattle.

In fact, people often consider it when it’s too late. “I have customers who say, ‘Mom is 80. She’s developed health issues. We need LTC insurance,’ says Marc Jacobson, president of Marc Jacobson & Associates, an employee benefits company in Northbrook, Ill. “That’s not a good place to be.”

Especially considering cost. Nursing homes, the most expensive care venue, average $56,000 a year, according to the National Association of Insurance Commissioners in Kansas City, Mo.

Since there’s no time like now to consider LTC insurance, ask yourself:

• At what age should I buy it? “People used to say by 50, but my sister-in-law developed multiple sclerosis at 43,” says Marilee Driscoll, author of The Complete Idiot’s Guide to Long-Term Care Planning (Alpha, 2003). It’s important to sign early, she says, so a pre-existing condition doesn’t preclude coverage and because premiums become costlier with advancing age. (See “Comparing costs.”) The median age of REALTORS® is 51, according to the 2003 NAR Member Profile.
  
• Which companies offer policies? About 157 private companies sold LTC insurance last year, according to NAIC, including CNA, GE Life Assurance Co., John Hancock Life Insurance Co., and Prudential Life Insurance Co. of America.
  
• How much does it cost? Prices for daily and monthly coverage and benefits offered vary widely. Driscoll advocates comparison shopping and checking a company’s rating from an independent source, such as A.M. Best Co. Build in a 5 percent to 10 percent premium rate increase every 10 years.
  
• What’s critical in a policy? An inflation rider compounded annually to keep up with rising costs; a 90-day elimination period, the number of days you must wait before your benefits kick in; comprehensive coverage so you have a choice of where you receive care; and the longest benefit period you can afford, Driscoll says. Lifetime is ideal.
  
• Can I pare costs? “The company with which you’re affiliated may offer a discounted rate—Coldwell Banker does—and your premium may be tax deductible,” Jacobson says. “Consult your tax adviser.”
  
• Any caveats? Don’t buy LTC insurance if to do so you have to stop paying important bills, Jacobson cautions. NAIC (www.naic.org) offers a free copy of its brochure, A Shopper’s Guide to Long-Term Care Insurance, by calling 816/783-8300.
  
  The prospect of needing long-term care is unpleasant. But LTC coverage assures that you’ll be able to convalesce under a watchful eye and skilled hand.

Comparing costs

What will you pay for long-term care insurance? It depends on your age. Here are average annual premiums for a three-year period and for life. Each assumes a $100 daily benefit, 90-day elimination period, 100 percent coverage for home care, and 5 percent compounded inflation for benefits.

Age Three years Lifetime
40 $ 562 $ 1,019
50 733 1,362
60 1,120 2,016
70 2,193 3,782

Source: The Complete Idiot’s Guide to Long-Term Care Planning (Alpha, 2003)

MORE ONLINE

For info about long-term care insurance offered through REALTOR VIP® Program partner Marsh Affinity Group Services, go to REALTOR.org/realtorVIP.

QUOTE

The purpose of insurance is to cover catastrophes. You should always hope you’ll never have to use it.
—from The 9 Steps to Financial Freedomby Suze Orman (Three Rivers Press, 2000)