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Money October 2012

Dollar Sense

For Your Security, Have You Considered Long Term Care Insurance?

By Teresa Ambord

Remember, these are only averages. Some states are less, but some are shockingly higher. If you are a resident of Alaska and require nursing home care in 2012, expect a bill upwards of $232,000 for a private room. To see what the average costs are in your state, go to your Internet browser and type in “Genworth Financial, Cost of Nursing Home, 2012.”

Whether for you, your spouse, or your elderly relatives, there’s a good chance that someday the services of a nursing home will become necessary. We’re living longer, which is the good news. But the bad news is, many of us will live longer but only with the assistance of a nursing home or at a minimum, home health aides. Among adults age 65 and up, roughly 43 percent enter a nursing home at some point. What’s even more troubling is that 40 percent of the people now receiving long-term care (LTC) are under 65. Strokes, accidents, multiple sclerosis, brain tumors, and Parkinson’s disease render many people helpless or somewhat helpless long before they reach retirement age. The average stay is about 2 ½ years. How much could that cost, you may ask?

Here are the latest figures from the Genworth Financial annual survey.

In early 2012:

  • $222 per day for a private room in a nursing home. That translates to $81,030 for a year.
  • $200 per day for a semi-private room in a nursing home, or $73,000 for a year.
  • $19 per hour for a non-Medicare home health aide.

Remember, these are only averages. Some states are less, but some are shockingly higher. If you are a resident of Alaska and require nursing home care in 2012, expect a bill upwards of $232,000 for a private room. To see what the average costs are in your state, go to your Internet browser and type in, “Genworth Financial, Cost of Nursing Home, 2012.”

It probably will not surprise you to learn that the cost of purchasing long term care insurance rises dramatically as you age. At some point you may not be able to get it at all. In fact, some insurers have stopped offering it because the payout can be enormous.

When Choosing a Policy

The reputation and stability of the insurance company is critical. Ordinarily you will begin buying this policy many years before you need it. So don’t make your decision based mostly on affordability. If the company closes its doors before you need the coverage, the affordable policy becomes useless.

Ask about the inflation aspect of a policy before you buy. How will inflation affect your coverage when you need it?

Beware getting a policy that requires a long waiting period between initiating the policy and your ability to be covered. Accidents can render you in need of care long before you anticipate it.

Ask your agent if your policy pays actual costs, or “customary and reasonable.”

Ask what type of documentation you need to prove your need for benefits. Will the company take your doctor’s diagnosis, or require you to be seen or reviewed by their doctor before they will cover you?

Some long term care policies can be shared with your spouse, for cost savings. Possibilities include: separate policies that each have riders, allowing the other spouse to use unused benefits, alternative policies that give each spouse a specific amount of benefits plus a third amount that either can use.

Don’t Forget the Tax Break

When tax time rolls around, the amounts you pay as premiums for long term care insurance may yield a deduction on your federal taxes, to a point. The deductible amount depends on your age on the last day of the year.

The maximum amount you can deduct for 2012 is:

  • $350 if you are age 40 or under.
  • $660 if you are age 41 to 50.
  • $1,310 if you are age 51 to 60.
  • $3,500 if you are age 61 to 70.
  • $4,370 if you are over age 70.

Many states also allow a deduction for the purchase of LTC insurance. The savings can be significant, so be sure to let your tax adviser know you’ve paid these costs.

[Note: Welcome to the department of hyphenation havoc. Take your pick: long term care insurance (insurance companies); long-term care insurance (New York Times); long-term-care insurance (Wall Street Journal, NPR). For a wonderful, witty, informative piece on hyphens, and to justify our position on sticking to AP style as much as possible, see this: http://www.jour.sc.edu/news/csj/CSJApr08.html]

 

Teresa Ambord is a former accountant and Enrolled Agent with the IRS. Now she writes full time from her home, mostly for business, and about family when the inspiration strikes.

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