Anyone might, when catastrophe strikes

Imagine this. You have a great job at 55… and a comfortable life with income of $75,000 a year. You have money in the bank, no debts and are able to live comfortably. But then something happens.
And from where you stand, it’s worse than a stock market crash. Worse than a severe recession. Worse than almost anything you can imagine.

Your spouse suffers a debilitating stroke. And before you can even begin to cope with the emotional strain, you realize the financial impact will soon leave you penniless. At more than $190 per day, the care facility costs come to over $70,000 a year ¬— almost as much as your entire income. Your medical insurance won’t pay for this type of care, nor will Medicare. Unfortunately, you’ll need to liquidate your retirement investments to pay the bills. And bankruptcy may be just around the corner.

This is the type of situation that can be averted with the ownership of long-term care insurance. Most people buy this coverage to protect assets, preserve independence and provide quality of care. A growing number of younger people are buying it to help their aging parents.

What to Look For:
In general, long-term care protection makes sense for people with a net worth of $100,000 to $2 million. Those with less will exhaust their assets and qualify for Medicaid; those with more can usually fund their own care.

With up to 100 policies in the market — each with different benefits, premiums and application requirements — it pays to comparison shop. Here are some tips for comparing long-term care insurance:

• Look for a daily benefit that would cover the average daily nursing-facility cost in your area. The national average is $194.28 per day or $70,912 per year, according to Genworth Financial’s 2006 Cost of Care Survey.
• Look for an elimination period (the time before your benefits begin) of 90 days. Remember, this is catastrophic coverage. Most people who need the insurance can afford the cost of care for three months. Plus, this approach lowers your cost — in some cases by as much as 30% per year.
• Insist on a policy from an insurance company that is rated “A” or better by A.M. Best.
• Insist on a policy that covers homemaker services, allows for home modifications, covers home medical equipment and pays a monthly maximum for home care.
• Your premiums are based on your age at the time of application. So the sooner you apply, the easier and less expensive it is to get coverage. The longer you wait the greater your chance of becoming uninsurable. Nationally, one in five is declined by insurers due to existing medical conditions.
• If you find that a policy insuring 100% coverage is too expensive, consider an alternative strategy of purchasing less coverage — say 50% to 80% — and in the event you need care, pay the difference with your own money.

As life expectancy increases, this issue becomes increasingly important as evidenced by a new campaign launched by the federal and state governments in eight states.

Plan ahead
The Long-Term Care Awareness Campaign, Own Your Future, is a project to increase consumer awareness about the need to plan ahead for long-term care. The Campaign is a unique partnership between the federal government — HHS agencies including the Administration on Aging (AoA), the Centers for Medicare and Medicaid Services (CMS), and the Office of the Assistant Secretary for Planning and Evaluation (ASPE) — and the states.

Own Your Future is a comprehensive roadmap for planning your future. It will help you prepare for the long-term care needs you may have in the coming years. States participating include Arkansas, Idaho, Kansas, Maryland, Nevada, New Jersey, Rhode Island and Virginia. You can order a kit at www.aoa.gov/ltc.

Whether you should buy long-term care insurance depends on your age, health status, overall retirement goals, income and assets. Many people buy a policy because they want to stay independent of government aid or help of family members.

The choice is yours. Just make sure you shop and choose well. It’s a decision that can have a great impact on how you live as you age.