2012-01-06 / Columnists

Financial Focus

Understanding Long-Term Care
Commentary By The Staff of Edward Jones Financial

It’s important to help protect your loved ones from financial, physical and emotional burdens if you should require long-term care.

Long-term care is the assistance or supervision you may need when you are not able to do some of the basic activities of daily living like bathing, dressing or moving from a bed to a chair. You may need assistance if you suffer from an injury like a broken hip, an illness or a stroke. Others may need help because of mental deterioration called severe cognitive impairment, which can be caused by Alzheimer’s disease, other mental illness or brain disorders.

Basic Components of Long-term Care Insurance;

Benefit Amount, the maximum amount of expenses covered in any single month or day. Benefits amounts vary by plan;

Benefit Period. This is the minimum number of months the coverage will pay benefits for covered expenses.

Total Benefit Amount. The total benefit amount is determined by multiplying the monthly benefit amount by the benefit period.

These are the funds that are available for covered care. For example, to determine a monthly benefit amount of $5,000 with a four-year benefit period, multiply $5,000 (benefit amount) x 48 months(thebenefitperiod4x12 months). The total amount of benefit dollars available is $240,000.

Inflation Protection This is an optional feature available on some plans. Generally it increases the monthly maximum to help ensure the policy keeps pace with the increasing costs of care.

Elimination Period This is the amount of time that must pass before the benefits will become available. Just like a deductible, this is the out-of-pocket expense. The shorter the elimination period, the higher the premium will be.

Long-term Care Insurance Benefits. Knowing what the benefits of long-term care insurance might be, can help you determine whether it’s right for you and your family. These benefits include:

Giving you the flexibility to participate in deciding where to get care and who provides it;

Helping protect your retirement savings by letting you use them for what it was originally intended — enjoying retirement;

Helping protect the family from providing all the care.

Talk with a financial advisor to evaluate appropriate strategies for yourself and your loved ones.

Funding Long-term Care

Some options for funding long-term care include: self funding, government programs and long-term care insurance; Self-funding, which is paying for long-term care costs out of pocket with personal or family money, savings, pension benefits, stocks, bonds and other investments. (Pros) Flexibility in choosing care providers. (Cons) Could jeopardize goals and may be costly.Family or loved ones provide care and may need to contribute financially. (Pros) Care provided by those you know and trust. (Cons) May not be skilled at providing care. Caregiver may have to decrease work or shift priorities.

Government Programs

These programs, such as Medicare and Medicaid, can help pay for some long-term care expenses in certain cases, but they generally do not pay for care at home.

(Pros) Care possibly paid by government. (Cons) Limited or no coverage.

Long-term care insurance

This insurance is designed to provide coverage for extended care. Ordinary health insurance and medical expense policies do not pay for long-term care expenses.

(Pros) Transfer some or all of the risk. May prevent depletion of personal funds. (Cons), May never use coverage.

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