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Long-Term Care Insurance: Planning and Possible Alternatives

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One of Julianne Moore's most brilliant performances is in the 2014 movie 'Still Alice'. Moore's character, Dr. Alice Howland is a linguistics professor at Columbia University who is diagnosed with early on-set Alzheimer's disease at age 50. She first notices something is wrong when she begins to get lost on her daily jogs in her neighbourhood and forget words. Howland's disease advanced somewhat fast and her three adult children are faced with the frightening possibility of having an Alzheimer's gene. When Howland wets herself after she got lost in her home while looking for the bathroom; it becomes evident that she requires some form of long term care.

Twelve million Americans over the age of 65 are projected to need assistance in daily living activities by year 2020. This means two in three adults aged 65 will require some form of long term care, that is, help in activities like bathing, eating, dressing, toileting, walking, transferring (from bed to chair), and like all other things, a long term care insurance is the most likely means to pay for this possibility.

In 2012 alone, total spending for long term care was reported at $219.9 billion which is approximately 9.3% of all U.S personal health care spending. Despite this fact, most people still don't take proactive measures towards long term care investments. They either rely on Medicare which does not cover ongoing long term care, or they cling to family support which puts a huge toll on them and most times causes a huge dent on their finances.

Long term care insurance is different from a regular health insurance, because it has more features not covered by traditional health care services. In this case, it caters to individuals who are unable to perform some daily living activities such as bathing, eating, walking and more. Using our movie illustration above, Howland's second daughter eventually moved back home to care for her mother while the family sought a more permanent plan for Howland.

While it's super important to act fast, it also pays to do extensive research and weigh your options before choosing the right solution for your family.

So what are your options for a long term care insurance?

1 Be healthy and able bodied all your life

While some aspects of this option is not totally in our control, there definitely habits that can help us live a healthy lifestyle. In fact, research has shown that eating and living healthy could help you live longer. If you can take care of yourself until your last day on earth, you have no need for long term care insurance.

2 Health savings accounts-

The health savings account offers the option of setting aside money for medical costs such as long term care. This option comes with a tax-free advantage specifically available to taxpayers in the United States who have a high-deductible health plan.

3 Traditional Long term care insurance

It is rare to find a policy that will offer total coverage for as long as you need long term care. Most traditional long term care insurance offers a maximum benefit pool of about $215,000 and a maximum period of coverage of about four years, whichever comes first. Long term care insurance is expensive and tricky with a downside of a 'use or lose' policy meaning all your money is gone if you never require it. With an average annual cost for a private room at a nursing room pegged at $91,250 according to Gensworth Financial, the top provider of long term insurance policies; most people who need it cannot afford it and wealthy Americans would rather pay out of pocket. However, one area that out of pocket payment can not cater to however is inflation. Long term care insurance offers an inflation protection option that helps grow your benefits over time alongside inflation.

4 Life insurance combined with a long term care policy

This option is a sort of best of both worlds and offers a death benefit (from the life insurance), a maximum benefit pool of about $150,000 and a maximum period of coverage ranging from 33 - 50 months. This option also lets you accelerate your death benefit to pay for long term care. There are different variations of this hybrid policy but be sure to look out for those that offer spousal benefits where spouses also receive coverage or those that have a return of premium option so you can pull out of the investment at anytime and get your premium back at 0% interest.

Whatever plans you decide to settle with, know that the true value of your policy also depends on the laws of your state and the cost of long term care there. As with most things financial, there are risks attached. Insurance companies are known to increase the premiums on policies so it is advisable to study a company's premium rate history before purchasing a policy.

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