Yesterday The Wall Street Journal published the article “Should You Purchase Long-Term Care Insurance?” Actually, it was a debate between two people. Mark Meiners, a professor of health administration and policy at George Mason University, argued in favor of long-term-care insurance. Prescott Cole, a senior staff attorney at California Advocates for Nursing Home Reform, argued against. I feel compelled to respond because of Mr. Cole’s misrepresentation of the facts about long-term care insurance.
Much of Mr. Cole’s argument seems based on the belief that most care is still done in nursing homes. However, the facts are that over 85% of care is now received outside of nursing homes, making much of his argument moot. Nursing homes are one of the myriad care options available to those with long-term care insurance, but most claimants now prefer care in settings ranging from the comfort of their own home, to adult day care, to assisted living facilities and more.
Instead of asking “Should You Purchase Long-Term Care Insurance?” a better question is “What Is Your Long Term Care Plan?” because that’s what this argument really boils down to. It’s not the risk of experiencing a long-term care event; it’s about the consequences if it does happen. Insurance can’t prevent the risk, but it can help your caregivers manage the consequences.
Let’s face it, when you need care, someone will provide that care, most likely a family member. So, it becomes a matter of how providing your care will affect their health, finances and emotional state. Numerous studies have shown that family caregivers experience a higher level of physical fatigue and are more prone to illnesses. They experience almost double the normal rate of depression as they try to juggle work, their own family and your care. Family caregivers also experience financial difficulties as they work less, lose job opportunities, and pay out of pocket for some of the expenses of your care. Also, for a spouse, any money they spend on your care now is that much less that they can rely on for their own future needs. An insurance plan might not completely eliminate any of these stresses on caregivers, but it may reduce them to a more manageable level.
Mr. Cole also claims that in “the game” of long-term care insurance, you are playing with a “stacked deck.” What he fails to realize is that some of the insurance options available can stack the deck in your favor. For example, the shared-care option with many policies allows two people to share the risk by linking their benefits together. If one exhausts their policy benefit, they can use some or all of the spouse’s policy. Another option is to select a policy that links long-term care benefits with an annuity or life insurance policy: a win-win proposition. If you ever need long-term care, the policy will pay for the care, leveraging your premiums to many times your initial investment. If you never need care, your heirs will receive a death benefit from your plan. Linked benefit policies eliminate the “if I never use it, I lose it” argument.
As medical advances help us live longer, many of us will need some form of long-term care. The time to plan for how you will handle that eventuality is while you are younger, are in good health and have options. Like any kind of long-term strategy, you should first educate yourself on the options available to you, and then work with an experienced professional to make an informed decision. That way, whether you choose to insure with traditional long-term care insurance or one of the linked benefit policies, or you self-insure using your own money, you will go into that decision knowing all the pros and cons of your decision, and know how it will affect not just your care, but the lives of those around you.
During a dinner party a few months ago, I learned that a mutual friend (and father of four) had been diagnosed with a rare form of leukemia. Thinking of his kids ranging in age from newborn to 5, I immediately wondered aloud if he had life insurance. None of us at dinner knew for sure.
Ever since that night, I’ve found myself trying to craft a simple message about life insurance that could penetrate the over-stimulated consciousness of my generation—I’m 34, a mother of two, and stuck somewhere between Gen X and Y. I Facebook, I tweet and I live on my iPhone. I work full time and handle most of the finances for our household. I buy through Groupon and consult with my neighbor, Jill, before any major purchase.
When it comes to life insurance, I think it all comes down to protection. My friends and I are all obsessed with protecting our kids from every possible threat, be it germ or Internet predator. And we think about it all day, every day. Hand sanitizer, flu shots, helmets, even car seats until the kids weigh 80 lbs.! Yet, we don’t buy life insurance. There seems to be a disconnect here somewhere.
In an effort to raise awareness, I created this one-minute video, envisioned as a sort of public service announcement about the value of life insurance. Watch and let me know if it resonates with you.
Why are soap operas so riveting? Is it because the characters are larger than life and always, always live in a really big, fancy house, regardless of their profession or income? Or, maybe it’s due to the fact that despite everything being over the top—from the plot to hairdos—there is a kernel of truth in these stories … something that resonates with us. That’s why I think “All My Paychecks” will resonate with you. Indulge in a few minutes of guilty pleasure and watch (all three episodes!). Then let us know what you think.
Decades ago, the traditional family unit consisted of a husband and wife with 2.5 children. Most women were stay-at-home mothers, able to call on extended family members in case illness or injury affected their abilities to care for their children.
But these days, there is no longer a “traditional” family unit (and by extension, an extended support network), as the following figures attest:
In 2010, 43.6% of all U.S. residents 18 and older were unmarried—more than half of them women—while the elderly comprised 16.5% of all unmarried and single people 18 and older.
45% of households nationwide were maintained by unmarried men or women, while number of single parents living with their children in 2010 reached 11.7 million. (Almost a third of grandparents are raising their grandchildren.)
There were 6.5 million unmarried-partner households, which included 581,300 same-sex couples.
Finally, the number of people who lived alone totaled 31.4 million in 2010, comprising 27% of all households—up from 17% in 1970.
What does this mean to you? Well, if you fall into one of the above categories—a single parent or grandparent raising a child, an adult living alone, or an unmarried couple—you need to do a little “worst case scenario” thinking. Specifically: should you experience an illness or injury that results in a disability (temporary or permanent), what type of impact will that have not only on your finances, but also on anyone who depends on you? During Disability Insurance Awareness Month, educate yourself about the reality of the impact a disability can have on your budget—and your life.
Disability coverage facts If you think you have your bases covered with health insurance, worker’s compensation or Social Security, the following information might change your mind.
While health insurance will cover medical-related expenses, it won’t provide an income to cover your needs if you are unable to work even for a relatively short period of time.
Worker’s compensation coverage only comes into play if the disability is job-related—which only happens in about 5% of the cases, according to the Council for Disability Awareness. (If you’re playing the odds, you might want to reconsider, since 30% of those entering the workforce today will be disabled for three months or more during their career, with the average long-term disability claim lasts 31.2 months.)
While Social Security provides coverage, qualifying for benefits can be challenging (60% are initially denied) and, at a little over $1,100 a month, the average monthly payment is barely above poverty level.
In the meantime, bills keep mounting up and your financial situation becomes even more precarious. According to one study, more than 62% of bankruptcies in 2007 were due to medical issues—a significant increase from the 2001 figure of 46.2%.
Fortunately, you do have several options to help safeguard yourself and those who depend on you. Employer-sponsored coverage (short-term disability insurance, long-term disability insurance, or both) can replace a significant percentage of your income—possibly up to 40% to 60% of your pre-tax income. (In a few states, employees can also purchase additional short-term disability coverage on their own, paid for through payroll deductions.)
If you are self-employed or want a stronger safety net, an individual disability insurance policy is the best choice. Start by calculating the amount of income you would need to maintain your current standard of living in the event you’re unable to work. Then, look at your life and work situation. Do you have children, a spouse or an elderly relative who depends on you for support? Is there a cap on the benefits available through your employer—and are you getting close to that level? Finally, has your standard of living increased or you have taken on a significant amount of new debt?
Once you have a clearer picture of your “worst case scenario,” schedule a meeting with your insurance advisor to review your disability insurance purchase options: through your employer, a professional organization or on your own. This will help you make the best decision for your budget, your future and those who are part of your “family unit.” For more disability information, visit www.protectyourpaycheck.org.
is “What Is Your Long Term Care Plan?” because that’s what this argument really boils down to. It’s not the risk of experiencing a long-term care event; it’s about the consequences if it does happen. Insurance can’t prevent the risk, but it can help your caregivers manage the consequences.
