Rethinking the Long Term Care Insurance?
Check Out This New Study
By GLENN RUFFENACH
Staff Reporter of THE WALL STREET JOURNAL
Can't decide whether to buy long-term care insurance? A
new study offers some interesting -- and atypical --
advice for older adults.
The report -- "Private Long-Term Care Insurance:
Who Should Buy It and What Should They Buy?" -- was
published in March by the Henry J. Kaiser Family
Foundation, a health-care philanthropy based in Menlo
Park, Calif., and online at http://www.kff.org/.
For many so-called working-age adults, those in their 50s
and younger, the study suggests that stand-alone policies
might not be a good investment, at least for the moment.
That's because the amount of time likely to pass before
most of these individuals would tap their benefits and the
evolving nature of long-term care insurance itself could
quickly make a policy bought today obsolete.
For "older purchasers," however -- those
individuals who are at or near retirement and thus better
able to gauge possible long-term care needs -- the report
takes a different tack.
To begin with, the study suggests taking a pass on
"ideal" or comprehensive policies -- the kind
that most insurance agents first place in front of you,
which cover nursing-home stays of five years or longer and
provide daily benefits of as much as $200 (at the time of
purchase). Such plans are simply too expensive for most
people. Rather, a more sensible approach, according to the
study, might be to identify "the reasons [a person]
is seeking coverage and then begin to build a plan that
might best meet [those] needs." And here's where the
report turns conventional wisdom on its head.
To cite an example from the study, let's say you aren't
as concerned about leaving an estate for your children as
you are about having insurance that will help pay for home
care down the road (while still leaving enough money for
routine expenses). At the same time, you want a policy
that -- should you require a nursing-home stay of a year,
give or take -- will provide a large enough benefit so
that you won't have to sell your home. (Forty-four percent
of people who reach age 65 can expect to have at least one
nursing-home stay. The average stay is 2.4 years; 47% of
patients stay one year or less.)
If that's the case, you might want to shop for a policy
that, first, covers only a year or two of nursing-home
care and allows you to enhance other parts of your plan,
like home care. Second, you might want benefits that kick
in the day you enter the nursing home -- a plan with no
waiting period. After all, if you have only limited
resources to begin with, paying for the first 60 or 90
days of nursing-home care out of your own pocket, before
benefits begin, could leave you with some nasty cracks in
your nest egg.
Such thinking flies in the face of conventional wisdom
about long-term care insurance: namely, get a policy that
covers at least three to five years of care (the
proverbial worst-case scenario), and one with a long
waiting period before benefits start (90 days, in most
cases) in order to help lower premiums. "In
sum," the report states, "modest-income elderly
people might be better served by policies that are quite
different from those commonly sold today."
So, should you begin shopping for a policy with a
one-year nursing-home benefit and no waiting period? Not
necessarily. Remember: Everyone starts with different
assumptions and goals. Perhaps you wish to leave an estate
to your kids; perhaps you feel more comfortable with a
plan (if you can afford it) that covers at least three
years of nursing-home care.
That said, the Kaiser Foundation report provides some
fresh insights -- and a dose of common sense -- for
would-be buyers of long-term care insurance. It's worth a
few minutes of your time. The entire 38-page report is
available on the group's Web site. (Under "Browse by
Topic," select "Long-Term Care.")
June 14, 2003
Glenn Ruffenach is editor of "Encore,"
The Wall Street Journal's guide to retirement. You may
write to him at: encore@wsj.com
|
