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Articles
The Experts section of "Inside Business"
Long Term Care 101:
What Families and Businesses
Need to Know
Long term care is a very important topic nowadays. With more and more families facing the challenge of caring for loved ones, there are steps their employers can take to provide the money to pay for the desired care and increase everyone’s peace of mind.
Naturally, we all want to remain independent, be financially secure, and maintain a high quality of life. However, no one can predict the future. However, one thing is certain- we’re all going to get older, we may get sick and we may need care. Here are some answers to frequently asked questions to assist you in making informed decisions regarding long term care.
What is long term care? Long term care includes all the assistance you could need due to a chronic illness or disability that leaves you unable to care for yourself.
Private health insurance generally only pays for skilled care which is simply care to make you better. Once you’re in a maintenance condition, you’re generally not covered by private health insurance.
Long term care provides custodial care which includes assistance with activities of daily living such as bathing, continence, dressing, eating, toileting and transferring. This care can be provided in the home, in an assisted living facility, or in a nursing home.
Who needs long term care? About 40% of people needing long term care are between the ages of 18 and 64. About 57% of people age 65 and older require help with activities of daily living. About 21% of Americans are either caring for an aging parent or have done so in the past. The average annual cost in 2007 for care in a nursing home and an assisted living facility is $75,000 and $35,600, respectively, but this varies greatly depending on the region of the country. Lastly, about 60% of the population will need long term care sometime during their lifetime.
What about government-funded programs? The federal government spends about 44 cents of every income tax dollar on entitlements such as Social Security, Medicare, and Medicaid. A government long term care program will likely be a larger entitlement than these existing programs. Medicare only pays for skilled care and ends after 100 days.
What about Medicaid? Medicaid is a state and federal welfare program for individuals with low incomes and few assets. If you qualify for Medicaid, you will receive care, but it will at a facility of the government’s choosing and not necessarily in your local area.
What are my options to pay for long term care? Long term care represents the largest potential out-of-pocket expense for most families. You can pay for it yourself out of your savings, investments, and/or retirement funds. However, this could have a substantial effect on your income. You can qualify for Medicaid, but as I mentioned above, there are strict asset and income requirements and you lose control over your care. The most prudent option is to purchase long term care insurance to protect your assets and to pay long term care expenses. Yes, that costs money, but it protects your assets allowing you to maintain your standard of living and have control over the type and location of your care.
How do I determine if I need long term care insurance? If you wait until you need the insurance, you may not be insurable or the premiums may be cost prohibitive. Factors you need to consider include your health, your family history, and your life expectancy.
If I decide to buy long term care insurance what are some of my choices? Key considerations include the amount of the daily benefit, the length of the benefit period, the elimination period (a deductible), and how you want the benefit to be indexed for inflation among others.
Who can give me objective advice on the need for long term care insurance? Long term care policies are sold by life and health insurance agents. Not all agents sell long term care insurance. If you talk to an agent, ask what portion of their business is focused on long term care and if they are an independent agent or can only sell one company’s product. Based on those answers, you can decide who can best help you make a decision on whether or not the coverage is needed and the most appropriate features.
Long term care insurance can be a very critical component of a family’s financial plan. Employers can play an important role by providing it as a worksite benefit for their employees helping them with the financial and emotional burden of caring for loved ones.
Bruce F. Williams is a financial advisor with Tidewater Financial Group in Virginia Beach.
Being Prepared for the Unexpected
Whether you are a business owner or an employee, you have financial goals- a new car, a new home, a second home, paying for college education for your children or grandchildren, or saving for a care free retirement.
But have you ever thought about your greatest asset? It’s your ability to work and earn an income. Most people have their lives and possessions protected through life, home, and auto insurance. However, unforeseen events can turn lives upside down.
So what are the chances of something happening to keep you from earning an income?
• A 30-year-old woman has a 57% chance of becoming disabled and only a 16% chance of dying before age 65.
• 5% of mortgages are not being paid because of the disability of the mortgage holder.
• Every 2 seconds someone is injured in an accident.
• Every 4 seconds someone is injured in an accident at home.
• Every 5 seconds someone is injured off the job or in a traffic accident.
So what about worker’s compensation? Most disabilities occur off the job and are not covered by workers’ compensation. With a disability, money keeps going out to pay for household expenses, but nothing comes in for living expenses. Imagine the bills, the potential loss of a home, the effects on saving for college, vacations, and the general quality of life if you become disabled. A disability can be just that type of life-changing event.
So what about Social Security? The Social Security Administration’s definition of disability is very limiting. You’ll only qualify if you are unable to engage in any substantial gainful activity due to a medical impairment that can be expected to result in death that has lasted or can be expected to last for a continuous period of not less 12 months. Furthermore, a person must not be able to do his/her previous work or any other kind work that exists in the national economy.
So how can you protect yourself against the unexpected? One way is through disability income insurance. It can provide up to about 60% of your gross income. If you pay for the premiums, generally the benefits are tax free. If an employer pays the benefits, generally the benefits are taxable to the employee. While your health insurance is portable from one company to another, employer sponsored disability income insurance in most cases is not.
So who is the most susceptible to a disability? Middle income workers are likely in the weakest position to financially combat a disability since their saving cushion is usually relatively small. Single parent households are also at risk and the number of them has doubled since 1970. Most small business owners are also at risk as about 80% of them don’t have coverage. Many are hanging on by a financial thread. How long can their businesses continue to remain open and pay their employees if they are not on the job?
So who should consider disability income insurance? Just about everyone who is dependent on earning an income.
Who can give objective advice on the need for disability income insurance and what should I look for? Disability income insurance policies are sold by life and health agents. Not all agents sell disability income insurance. If you talk to an agent, ask them what portion of their business is focused on disability income insurance and if they are independent or can only sell one company’s product.
So take time to see if you’ve protected your greatest asset-- your ability to earn an income. Remember, disability income insurance pays the bills when you can’t.
Bruce F. Williams is a financial advisor with Tidewater Financial Group in Virginia Beach. He can be reached at (757) 460-2889 or bwilliams@investorssecurity.net.
The Experts: Disability insurance
Answers to questions on disability coverage
Bruce F. Williams
Inside Business - Hampton Roads
Monday October 1, 2007
Whether you are a business owner or an employee, you have financial goals – a new car, a new home, a second home, paying for college education for your children or grandchildren or saving for a carefree retirement.
But have you ever thought about your greatest asset? It’s your ability to work and earn an income.
Most people have their lives and possessions protected through life, home and auto insurance. However, unforeseen events can turn lives upside down.
So what are the chances of something happening to keep you from earning an income?
• A 30-year-old woman has a 57 percent chance of becoming disabled and only a 16 percent chance of dying before age 65.
• 5 percent of mortgages are not being paid because of the disability of the mortgage holder.
• Every two seconds someone is injured in an accident.
• Every four seconds someone is injured in an accident at home.
• Every five seconds someone is injured off the job or in a traffic accident.
So what about worker’s compenstation?
Most disabilities occur off the job and are not covered by workers’ compensation. With a disability, money keeps going out to pay for household expenses, but nothing comes in for living expenses. Imagine the bills, the potential loss of a home, the effects on saving for college, vacations and the general quality of life if you become disabled. A disability can be just that type of life-changing event.
So what about Social Security?
The Social Security Administration’s definition of disability is very limiting. You’ll only qualify if you are unable to engage in any substantial gainful activity due to a medical impairment that can be expected to result in death that has lasted or can be expected to last for a continuous period of not less 12 months.
Furthermore, a person must not be able to do his/her previous work or any other kind of work that exists in the national economy.
So how can you protect yourself against the unexpected?
One way is through disability income insurance. It can provide up to about 60 percent of your gross income. If you pay for the premiums, generally the benefits are tax-free.
If an employer pays the benefits, generally the benefits are taxable to the employee.
While your health insurance is portable from one company to another, employer-sponsored disability income insurance in most cases is not.
So who is the most susceptible to a disability?
Middle-income workers are likely in the weakest position to financially combat a disability since their saving cushion is usually relatively small.
Single-parent households are also at risk and the number of them has doubled since 1970.
Most small business owners are also at risk as about 80 percent of them don’t have coverage. Many are hanging on by a financial thread.
How long can their businesses continue to remain open and pay their employees if they are not on the job?
So who should consider disability income insurance?
Just about everyone who is dependent on earning an income.
Who can give objective advice on the need for disability income insurance and what should I look for?
Disability income insurance policies are sold by life and health agents. Not all agents sell disability income insurance. If you talk to an agent, ask them what portion of their business is focused on disability income insurance and if they are independent or can only sell one company’s product.
So take time to see if you’ve protected your greatest asset – you ability to earn an income.
Remember, disability income insurance pays the bills when you can’t.
Bruce F. Williams is a financial adviser with Tidewater Financial Group in Virginia Beach. He can be reached at 460-2889 or bwilliams@investorssecurity.net.
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