Published April 26, 2012
“The Boomer” is a column written for adults nearing retirement age and those already in their “golden years.” It will also promote reader interaction by posting e-mail responses and answering reader questions. E-mail your questions or topic ideas to firstname.lastname@example.org.
Long-term care insurance is often touted as a way for aging boomers to protect their assets and to not be a burden on their family if a time comes when they can no longer care for themselves. After all, everything boomers have planned for in retirement could be at risk if, down the road, we need long-term medical care.
But the industry has come under scrutiny as longer life spans and rising premium costs have boomers and lawmakers questioning the viability of private long-term insurance. Just last month, insurance giant Prudential stopped selling individual policies over worries it wouldn’t be able to calculate the amount of funds it would need to pay potential claims.
Earlier this month, Sen. Bob Corker, (R-Tenn), called long-term care financing a "major train wreck" that is "heading for a national crisis." Corker, who is the senior Republican on the Senate Aging Committee, added that “there is no doubt there is a public sector role" in the future of financing of long-term health care.
Do boomers really need this kind of insurance, or are there ways for us to plan accordingly to not only cover any potential medical needs, but also have enough in our regular retirement savings? I reached out to Robert Quinlan, an independent insurance agent located in New Windsor, N.Y., to discuss the pros and cons connected with long-term care policies. Here is what he had to say:
Boomer: What exactly is long-term care insurance and what does it cover?
Quinlan: Long-term care insurance pays for extended care due to a chronic medical condition. It protects your assets and provides peace of mind and security, and Medicare and regular health insurance will not pay for these costs. These policies often allow you to choose where you receive extended care, and many will pay for home care, assisted living facilities, nursing home and hospice care. You will also have additional benefits from many carriers for home-based care to include home modifications like refitting a bathroom or a doorway, purchase of durable medical equipment, caregiver training, home safety checks and medical alert devices. You can choose the type of long-term care coverage that best suits your individual needs that are offered by carriers today, long-term care insurance (a traditional stand alone policy), life insurance (permanent policy like whole life) with a long-term care rider, an annuity with a long term care rider or Partnership for Long Term Care policy which is offered in many states today.
Boomer: At what age should we look into purchasing long-term care insurance?
Quinlan: You should purchase it when it is financially affordable. Younger people who buy it now will have the benefits of longer protection with lower premiums than if they wait until a later age. Of course, before you purchase it you should also consider life insurance and disability insurance to protect your income.
Boomer: What happens if you buy a long-term care policy and you never use it?
Quinlan: Long-term care insurance (traditional, stand alone type policy) is like auto or homeowners insurance: There is no surrender value if the policy is never used. If you purchase a life insurance with a long-term care rider and don’t need long-term care, your beneficiary will receive the policy’s face amount at your demise.
Boomer: How does long-term care insurance help you today and during your retirement?
Quinlan: You will have a greater sense of well being and security for yourself and your family today and into the future because it will provide financial resources to pay for care at home or other care settings. You and your family will also have caregiver support services, namely personalized telephone and website assistance regarding your caregiving questions and concerns. You are not left alone to provide the desired care for yourself or a family member. Long-term care costs are not covered by Medicare or regular health insurance. Consider long term care insurance as "retirement savings insurance." It is an essential part of your retirement planning.
Boomer: Is long term-care insurance heading for a national crisis?
Quinlan: No, I don’t think that long-term care insurance is headed for a national crisis. There are more than 30 insurance companies today that are offering long-term care insurance, but I do think that our nation is headed for a very challenging period of time. The nation’s trustees for Medicare reported recently that the hospital portion of Medicare (Part A) is expected to be exhausted in just 12 years. Congress has avoided making serious actions to correct or even minimize the effects of this situation in recent years. Many people do not think today about these adverse consequences of long-term care on their families and the prospects of shrinking government support.
Boomer: The cost of long-term care insurance today is often mentioned as a reason why some people don’t purchase it. Why, then, do people buy it?
Quinlan: People buy long-term care insurance because they see the value that it will bring today and into the future. Cost is only an issue in the absence of value. Why does someone purchase a car for $25,000 or more when they could buy a different car for $2,500? They want the value that the higher priced car will bring to them. A comfortable and secure future is a goal that everyone desires.