Updated: May 3, 2013 12:14PM
Originally published: September 18, 2003
As predicted here in January, some insurance companies are dropping long-term care coverage, some are raising prices, and now one big insurer is aggressively promoting a slightly different policy that is bound to attract attention. That makes this a perfect time to remind you that if you -- or your parents -- haven’t investigated long-term care insurance, the time is now!
Remember, Medicare does not pay for custodial care, nor does any Medicare supplement policy. If you want the flexibility of choosing care in your own home, by the caregiver of your choice, you’ll need to have plenty of money set aside--or purchase a long-term care insurance policy now, while you’re young and healthy.
AARP has announced a new long-term care insurance plan called MyChoice. It is underwritten by MetLife, and has features similar to other MetLife policies sold by individual agents. But because of a media blitz, this new LTCI policy is attracting baby boomers’ attention to the question of how to pay for tomorrow’s costs.
Aimed at younger buyers
This policy is aimed at younger buyers--starting at age 50. Of course, most younger people haven’t started to think about this kind of coverage, and they worry about “wasting” money on a policy that might not ever be used. AARP deals with that issue (as do many other policies) by offering a “return of premium” feature. That is, if you die before age 70 without having used all the benefits covered by the policy, your heirs will get some of the remaining premium.
Like most LTCI policies, you’ll have to choose the amount of coverage you can afford: The total amount of lifetime coverage (up to $200,000) and the maximum monthly benefit (as much as $6,000). Those choices will determine the premium you’ll pay.
And there’s one more ingredient. Like most long-term care policies, this one offers automatic inflation protection. And that’s a protection well worth paying for, even though it adds to the annual cost.
Here’s what you can expect to pay for the policy described above, including a 45-day deductible, automatic inflation rider, and return of some unused premium. (The illustration also assumes that you qualify for coverage by having no pre-existing conditions such as stroke, AIDS, cancer and some other dread diseases.) The maximum coverage in this example is $200,000 and up to $6,000 per month, which means the benefits would last 2.7 years.
**A 53-year-old would pay $344 per month.
**A 59-year-old would pay $436 per month.
**A 65-year-old would pay $576 per month.
That’s steep, but remember that a month of care in a top-notch nursing facility today could easily cost $6,000, and home health care can be more expensive. And in the future, those costs will soar.
One other interesting aspect of the AARP MyChoice program is the way benefits are paid out. All long-term care policies require that a doctor certify that you medically qualify to access the benefits. That is, you must be unable to perform some of the basic daily activities, such as dressing, bathing or feeding yourself. Many policies simply reimburse your costs of help in these activities, requiring that the service be performed by a qualified nursing aide. But the MyChoice program is more like disability insurance in that once you qualify, AARP will send you a check for the daily benefit you purchased -- and you can spend it in any way you choose.
While all the advertising for the AARP policy is definitely welcome, this policy is not necessarily always the best deal. For example, you might want to buy a longer benefit period, especially if someone in your family has Alzheimer’s disease, a condition that could necessitate a much longer period of care. Or you might lower your premium cost by taking on a 90-day deductible period instead of the 45-day period offered.
Shop and compare
It pays to get expert advice and compare offerings. One LTC expert found that you could save as much as 20 percent on a MetLife VIP policy over the AARP plan under certain circumstances.
You can get easy online comparisons or telephone counseling about competitive plans at:
**www.LongTermCareQuote.com (800) 587-3279.
**www.MagaLtd.com, (800) 533-6242.
Don’t think it can’t happen to you. Even Superman needs long-term care now. And that’s The Savage Truth.
Terry Savage is a registered investment adviser and is on the board of the Chicago Mercantile Exchange and McDonald’s Corp.