Financial News & TipsAlan S. Moore / L’Observateur / February 11, 1999As the baby boomer generation ages, long-term care insurance has recently been receiving a lot of attention from the media. Of course, likemany insurance products, it serves a particular market very well, but it is not necessarily for everyone.

Published 12:00 am Thursday, February 11, 1999

Long-term care insurance is not just one service, but several services aimed at assisting individuals with serious prolonged physical illness, disability or cognitive impairment (such as Alzheimer’s disease).

Services covered by this type of insurance may include, but are not limited to, help with daily activities at home, such as bathing and dressing, respite care, home health care, adult day care and care in a nursing home.

Who should be looking at purchasing this type of policy? Unfortunately, there is no simple answer. However, a good start is to evaluate yourneeds by taking your age, health status, overall retirement objectives and income into consideration.

Many people begin looking at these policies when they are already retired, but the cost for insurance is much less the younger you are. In addition,when you are younger, you most likely will not have the health concerns of an older person. If you already have potential long-term care healthproblems, you probably will not qualify for a policy because of the medical underwriting standards used to keep the cost of long-term care insurance affordable.

Long-term care insurance can be expensive. You should probably notpurchase a policy if Social Security or Supplemental Security Income (SSI) is your only source of income. Nor should you do so if it will cause you tohave trouble meeting other financial obligations, such as utilities, food or medicine.

The ideal candidate to purchase a long-term care policy would be an individual who can comfortably pay the insurance premiums. Even if thisindividual has substantial assets, they may feel their assets would be depleted if they had a prolonged stay at a nursing home; that is, their assets are not large enough so that the income produced will cover their expenses.

Although it is difficult to think about or even imagine, the fact is 60 percent of us will require long-term care at some point in our lives, and of that 60 percent, more than 40 percent will be over 65 years of age. Inother words, the older you are, the greater the probability some form of long-term care will be required.

This realization is further compounded by statistics that show there is a 1 in 4 chance you will pay $100,000 or more in long-term care expenses in your lifetime. Compare this to a one in 1200 chance of a $100,000 lossfrom a fire or accident in your home; a one in 240 chance of a $100,000 or greater liability suit arising from an automobile accident; and a one in 15 chance of encountering major medical expenses of $100,000 or more.

Surprised? Well, you are not alone. Most people do not even consider long-term care until they have a need for it. Even then, the assumption is thatMedicare or Medicaid will pay the expenses, but this is not always the case. Medicare covers less than two percent of nursing home expenses.Medicare only covers skilled care. Medicare does not cover custodial care(95% of people in nursing homes are receiving care at the custodial level).

Medicaid, on the other hand, will pay for nursing home expenses but only after an individual has exhausted his or her assets and needs financial assistance.

Currently, the cost of a year in a nursing home in the Washington area is approaching $60,000 a year, a figure not uncommon for large cities.

Nationally, however, the average cost for nursing home care is $40,000 to $45,000 a year. Home or custodial care-the care you receive when youneed help with day to day tasks-could be a little less but not much. So, asyou can see, even with the help of Medicare and Medicaid, long-term care can quickly deplete your savings if you are not prepared.

For some, especially those who want to maintain their independence and have the most choice as to where, when, and how care is provided, long- term care insurance exists as an option. Long-term care insurance coversthe costs of home health care, community-based care and nursing home care, and can work in conjunction with Medicare or private health insurance to help handle the cost of a lengthy illness.

Long-term care insurance can provide you or a loved one with the financial protection necessary during a period of serious prolonged physical illness, disability or cognitive impairment. It can also help you safeguard yourassets and protect your financial stability.

(Alan S. Moore is financial advisor of Legg Mason Wood Walker, Inc., adiversified securities brokerage and financial services firm that is a member of the New York Stock Exchange, Inc. and SIPC.)

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