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Who should buy long term care insurance?

Long term care insurance may be a good choice for you, but before you start paying money for it you would do well to see if you really need it (and if you can afford the cost of long term care insurance). Some people think that Medicare will cover all medical and long term care costs once one reaches the age of 65, but that is not the case. In fact, once your reach the age of 65 you cannot rely on Medicare or private health insurance. Medicare doesn’t pay for custodial care, and private health insurance rarely pays any of the cost of long-term care.

If you expect to have very little money when you need long-term care services, you might qualify for Medicaid, a government program that pays the medical and long-term care expenses of poor people. If you expect to be in that situation, you probably shouldn’t buy long-term care insurance, because your state’s Medicaid program may pay some of your long-term care expenses. Buying long-term care insurance would only save the state—not you—money. The exception is if you live in California, Connecticut, Indiana, or New York, states that have a Partnership for Long-Term Care program. For residents of these four states, buying long-term care insurance does offer an additional benefit.

If you expect to have a lot of money when you need long-term care services, you also probably shouldn’t buy long-term care insurance. Instead, you should plan to pay for the care “out of pocket”—that is, as a regular expense. If you fall in between these two categories, owning long-term care insurance, like all other insurance coverage, offers peace-of-mind benefits as well as financial benefits. In fact, it is estimated that almost all middle class Americans need some form of long term care insurance beginning when one reaches their 40’s.

If you’re under 85—and especially if you’re under 65—you shouldn’t ignore the topic of long-term care insurance because:

• A report from the Henry J. Kaiser Foundation indicates that over five million people ages 18-64 need some type of long-term care.

• The latest data from the National Center for Health Statistics (for 1999) reported that roughly 160,000 of the people living in nursing homes were under age 65 (nearly 10 percent of the total). Of those receiving home health care services, roughly 400,000 were under 65 (about 30 percent of the total).

So, unless you have so little money that you will qualify for Medicaid, or so much money that you can pay the bills out of your own pocket, you should consider buying long term care insurance. Be aware however, that long term care insurance can be cost prohibitive for some budgets – long term care insurance can easily cost more than $1,000 a year, which is one reason some experts say you shouldn’t buy the coverage unless you already have other types of insurance and cash to spare.

Many financial advisers say that purchasing long term care insurance is something to think twice about unless you will be able to pay the monthly premium with no more than 5% of your gross income. If you can afford the LTC premiums, and in addition to your home, you expect to have over $10,000 in assets and over $30,000 per year in income when you reach your 80s, then a long-term care policy may be a good option for you to consider.

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