What is your plan if you need care as you get older?
Perhaps you need a little help with meals or can't move around like you used to. Or perhaps your memory makes living alone an unsafe proposition. How would you pay for the help you need?
The answers to these questions will be different for each of us. Your family may have the ability to take care of you. You might have the financial resources to pay for in-home care or the cost of a stay in a care facility. Or perhaps you know that Medicaid will need to fund any care you receive.
If your financial situation is between very wealthy and limited resources, consider long term care insurance. A long term care insurance policy pays for care if you need assistance with two "activities of daily living," which are defined as dressing, eating, toileting, bathing, transferring (moving from one place of rest to another) and continence. or are diagnosed with cognitive impairment and have a doctor certification that you will require care for at least 90 days.
Many people say they'd rather take their chances that they won't need long term assistance and that they'll be able to afford it if they do. But what does that mean in dollars and cents? According to Genworth Financial, a private room in a nursing home in Colorado Springs can cost in excess of $85,000 a year. If you are married, your care could decimate the nest egg that you and your spouse have if your nursing home stay lasts for a year or more.
Long term insurance policies are relatively new in the insurance industry and continue to evolve. Rather than a "one size fits all" solution, you can make some choices regarding features to lower the cost of the policy. For instance, most policies allow you to have care in your home, have the amount paid for care keep up with cost of living increases, share the benefit with a spouse, and have the benefit paid in cash rather than to those providing assistance. If you don't pick all of these features, the cost is less to you and reflects your preferences. In many cases, the annual premium for a policy like this can be the same as the cost of one or two months of nursing home care.
I generally recommend that folks get coverage in their 50s. But if you're over that age, it's still worth exploring. If you decide to get a policy, talk to an insurance professional who works with several companies. That agent will be able to recommend a company that will have the best value for your medical history. Discuss with the agent the quality rating of the insurance company. You don't want to pay years of premiums, then have your benefits be unavailable because your company went out of business. And don't buy a policy during your first meeting. It's a big enough financial commitment that you should be able to think it over before writing a check.
Linda Leitz is a Certified Financial Planner and co-owner of Pinnacle Financial Concepts, Inc. She can be reached and welcomes questions at email@example.com.