Dear Tom and Alan: I think this whole long-term care deal is a scam. Man, I’ve got health insurance, homeowners insurance, car insurance, life insurance (my wife made me get it), house payments, taxes and on and on! How am I supposed to get extra money to pay for a nursing home I may never go to?
Fed up and Broke
Tom: Very understandable, Fed. In general, all insurance is about moving risk from your wallet to someone else’s. I recently saw one estimate that the odds of your house burning down is one in 300. We often speak to people who spend a ton of money on their health insurance premiums but never use it.
However, the big statistic for long-term care is that 50 to 70 percent of 65-year-olds will need it.
Al: I just got a program update on the California Public Employees’ Retirement System (CalPERS) long term care. This is one of several plans that might be available. Since 1995, CalPERS has paid out $1.5 billion in benefits. The average annual premium collected by CalPERS is $2,121; the average claim paid out is $2,141.
Since I’ve been paying into it for 17 years, it’s good to see the fund is solvent.
Tom: It’s pretty obvious what triggers all the other kinds of insurance (like a wreck or a fire), but there are very definite triggers for long-term care. First, if you have “cognitive impairment,” like Alzheimer’s or dementia, you go “on claim.”
Or…if you are unable to perform two of the six activities of daily living: bathing; dressing; toileting; transferring; continence; or, eating, this also triggers the beginning of your claim payments.
Of course, nothing happens until your physician certifies that you qualify for benefits.
Al: Unlike your home and auto insurance, you actually have to be healthy enough to qualify for a long-term care plan. The application is long and a pain in the neck with lots of medical questions.
Once you send it in they’ll send out a paramedic to take blood and urine samples. Also, the company usually calls you to make sure you know what you’re applying for.
Tom: Our reader didn’t say his age, but it’s important for everybody to know that long-term care is not covered by Medicare. Beyond 100 days in a skilled nursing facility is considered custodial and patients are cut loose.
Al: Over the past several years, we’ve had customers ask us about tax-deferred annuities with a long-term care rider. I just received a quote on “Annuicare” through Guaranty Income Life Insurance Company.
The idea is that you put money into it. If you need long-term care benefits you can receive up to three times the value in long term care expenses. If you don’t, your base value, plus accrued interest, goes to your heirs. Unfortunately, this also requires medical questions.
Submit questions or reach the Health Insurance Guys at Schrette Insurance, 1556 First St., Suite 105, Napa, 94559; 255-9511; firstname.lastname@example.org; or email@example.com.