Long-term care insurance can be confusing to buy, but important to financial security

Posted: Friday, June 28, 2002

NEW YORK (AP) -- As baby boomers grapple with how to provide at-home or nursing home care for aging parents, many are seeing firsthand how financially devastating it can be. That's prompted a growing number of boomers to look at long-term care insurance to cover their own future needs.

''There's nothing like family experience to motivate people,'' said Marilee Driscoll, who runs the Long-Term Care Learning Institute in Plymouth, Mass. ''I think people are realizing that anyone who wants to control where and how they're going to live when they need long-term care has to consider insurance -- if they can afford it.''

Long-term care insurance, a relatively new and often complex product, began as a way to finance nursing home care but has broadened to include home care, assisted living and even hospice services. Premiums can range from a few hundred dollars a year for a bare-bones policy bought by people in their 30s to thousands of dollars a year for an inflation-adjusting, all-inclusive policy bought by people in their 60s.

But while the 76 million boomers represent a huge potential market for long-term care as they age, most aren't rushing to buy. Just 8 million long-term care policies have been sold to date, and the purchasers haven't all been boomers.

Anticipating future medical problems is difficult for most people, and estimating where fast-rising health care costs will end up further clouds the issue. In addition, premium levels typically are not guaranteed for life because insurance companies don't have sufficient experience with claims.

''It's one of the most complex insurance products people will buy,'' Driscoll said. ''Prices vary dramatically among insurance companies; contracts vary; health requirements vary. You really need a specialist to help you select the best coverage for you.''

For Marian Ferziger, a 57-year-old New York accountant, the decision to buy her own long-term care policy came after her mother-in-law applied for one in her 80s and was turned down.

''It turned out she had a health problem that hadn't been diagnosed,'' she said. ''It was found during the (qualifying) physical. She's doing fine, but she was turned down for coverage.''

Ferziger and her husband, lawyer Rubin Ferziger, 53, figured that since they were in good health, they should consider getting their own coverage. They had a broker show them a number of policies. They also used the insurance planner available from Weiss Ratings Inc., a Palm Beach Gardens, Fla., firm that evaluates policies and the companies that offer them.

''I feel better having it,'' Mrs. Ferziger said. ''If I get sick, I don't want to eat up all of our assets so Rubin has nothing. The reverse is true, too.''

Benjamin Lipson, author of J.K. Lasser's ''Choosing the Right Long-Term Care Insurance,'' says many people avoid even looking into buying insurance because they don't like to deal with issues like aging, illness and death.

''It's also hard to look into the future and predict what you'll need,'' he said. ''The fact is, people are living longer and healthier lives. On the other hand, they're getting all kinds of illnesses, ailments and disabilities we didn't have to deal with when life spans were shorter.''

Some people, including baby boomers, also have put off considering long-term care insurance because of the mistaken belief that other policies will cover them.

But health insurance is for acute medical care, and disability insurance makes up for lost wages. Medicaid, meanwhile, is for institutionalized care for the elderly -- and only for those with limited financial means.

Sandra Timmermann, director of the MetLife Mature Market Institute, said one of the biggest benefits of long-term care insurance is that it gives individuals the ability to choose how they will be cared for.

''Some want to say in their homes as long as possible, perhaps with the help of a paid caregiver,'' she said. ''Others like the idea of assisted living, or perhaps a facility that offers progressive levels of care.''

Timmermann added that people who buy policies also are ''giving their family a good sense of what they want'' in terms of care as they age, an area many are hesitant to talk about.

Pricing, however, remains a big obstacle for many consumers. Weiss Ratings looked at 25,000 premium quotes from 35 long-term care insurers and found that prices varied dramatically. A person age 55 buying a comprehensive policy faced a range of offers from $1,730 a year to $2,733 a year, the study found.

And because insurers haven't had a long experience with these policies, most reserve the right to raise rates in the future.

Weiss Ratings president Martin D. Weiss, sees the policies as less like insurance and more like an enforced savings play. ''It's probably best for those who feel they wouldn't save the money otherwise,'' he said.

Beth Chapman, 58, a self-employed consultant, sees insurance as a tool to maintain her independence.

She remembers growing up sharing her family home with her father's father and her mother's mother.

''That set the stage for my father to buy long-term care insurance because he didn't want to be a burden to his kids,'' she said.

Chapman has saved for her retirement and figures that she's accumulated enough to cover her living expenses after she stops working, but not enough to handle any debilitating illness. She bought long-term care insurance to fill that gap.

''Philosophically, I don't believe the government should pay for my care,'' she said. ''I don't happen to think assisted living is a good model, either. I'd like to stay in my own home as long as possible and get the help there if I need it.''


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