Continuing on: How can I find out how much I can expect to receive from Social Security when I retire?

NEA Today, Sep 1998

Yes, long-term care insurance is expensive. But not having it may be more costly.

Who:

John Board, retired high school social studies teacher, Helena, Montana Financial Goal:

To avoid the risk of paying out-ofpocket for expensive nursing home or home health care

Game Plan:

Board and his wife started checking out long-term care insurance before his retirement in 1996.

"One of the reasons we looked into it is because of what I watched others go through, particularly a colleague who went through a long bout with cancer," Board says. "We didn't want to risk losing everything we had."

When NEA Member Benefits issued its first long-term care policy, Board asked his financial planner to compare it with the policies of at least three other companies.

"The other companies couldn't match the NEA policy as far as cost and coverage," Board says.

For Board, one of the policy's best features is that it covers both nursing home and home health care.

"I have no desire to spend any time in a long-term care facility if I can avoid it," he notes. "With this policy, I think that if either one of us becomes seriously ill, we'll be able to handle it a whole lot longer at home."

The Experts Say:

Long-term care insurance is a great hedge against the high cost of nursing home care ($40,000 or more for a year-long stay), especially since Medicare and Medigap supplemental insurance policies generally don't pay for long-term care. Medicare covers only short-term skilled nursing home care following hospitalization.

Long-term care insurance isn't necessarily for everyone-and it's expensive. Even if it's right for you, you have to choose your policy carefully.

Many long-term care policies are indemnity policies, meaning that they pay a fixed dollar amount for each day you receive care in a nursing home or at home. However, other, more economical policies reimburse you for expenses incurred, up to a dollar limit.

How much you'll pay for coverage varies according to how much you buy, where you live, and how healthy you are, as well as such factors as:

Your age. The younger you are, the lower your premiums. Of course, the younger you are, the longer you pay, too. But age 40 to 45 is not too young to start considering a policy.

The deductible period. The deductible or elimination period refers to the number of days you must be in residence at a nursing home, or the number of home services you must receive, before policy benefits begin. Most policies offer a choice ranging from zero to 100 days. A 20-day deductible, for instance, means that your policy will begin paying on the 21 st day. The longer the deductible period, the lower the premium.

Inflation calculation. Because the per-day benefit you buy today may not be enough to cover the cost of care years from now, most policies offer an inflation adjustment. Some policies calculate inflation using a simple interest rate, while others use an annual compounded rate. The latter. while ultimately providing you with a higher benefit, is more expensive.

So what's the bottom line? It varies, but let's say you want a policy with a $70/day nursing home benefit, a $40/day home care benefit, coverage for two years, inflation calculated at a simple rate, and a 90- to I 00-day deductible period. According to United Seniors Health Cooperative averages, if you're 55, this policy could cost you about $430 annually. If you're 68, it could cost about $1,139 per year.