As New Jersey residents plan for retirement, they must address the cost of future medical treatment. A few lucky individuals will need little medical care over the course of their lives, but many more will incur large hospital bills and some will even require extended stays in nursing homes. How to pay for long term care should be part of a person's estate plan, and one option is purchasing long term health care insurance.
Like other forms of insurance, it has its pros and cons, and people should decide whether it makes sense for them before signing a policy. For example, some suggest that those with medium incomes and savings should consider it the most. By contrast, those eligible for Medicaid can rely on government benefits, and the wealthy can pay out of pocket or self-insure. It is also important to note that Medicare will not help with long term care costs.
The principal danger of not having insurance is that extended care may quickly eliminate a lifetime of savings. Long term health care insurance can defray the costs of long term care, which can reach up to $250 per day. But people should know that many policies will not cover that entire amount, leaving some cost to the individual.
In addition, many policies will not start to pay out benefits until the policy holder has been receiving long term care for 90 days. Approximately two-thirds of people leave nursing homes within 90 days of their admission date, meaning the benefits have not yet kicked in. But that still leaves another one-third who will end up using the benefits.
In the end, whether to include a long term health care insurance policy in one's estate plan is a personal decision, based on one's individual circumstances and risk assessment. Opponents argue that few people end up getting good value out of their policies, while proponents assert that part of what people are buying is peace of mind: No one regrets being prepared for an emergency even if it never occurs.
Source: The Wall Street Journal, "Should You Purchase Long-Term-Care Insurance?" Mark Meiners and Prescott Cole, May 14, 2012.