The Shag Carpet Dilemma:
Should Long Term Care Be Considered in Your Financial Plan?

June, 2007
by Kelly C. Ruggles

Consumer trends can be funny and amusing. Fads come and go with the times, perhaps repeating the trend decades later. It is the shag carpet dilemma we face during our life that may result changes. Should the consumer adjust and upgrade the product or should he/she keep it as is.

There is one trend that seems to be gaining momentum and must be addressed. It is one that should not be ignored because of its potential to ruin your life savings. According to the Citizens for Long Term Care (CLTC), "Long term care in America is a predictable need for nearly half the country's population."

Long term care insurance policies can be complicated, but generally refers to coverage for medical and other services to maintain specific living arrangements, for a specific period of time, for a person in a deteriorated health condition where self-insurance, government programs, and standard health insurance policies do not cover the necessary expenses. According to the American Health Care Association, the cost of long term care could exceed $50,000 annually or more than $4000 per month. Factor inflation into the numbers and the costs quickly accelerate.

The list of options available with long term care coverage is lengthy, but the following summary is a good start for anyone considering a policy.

After reviewing the availability of non-qualified and qualified policies, the consumer should consider the daily amount necessary for care. States differ in their average facility costs.

How long should the benefits last? This is a question unique to everyone and requires a lot of thought. When reviewing the length of benefits, keep in mind the following: According to the Agency for Health Care Policy and Research (AHCPR), approximately twenty percent of facility users will spend five or more years in long term care arrangements (Kemper and Murtaugh, 1991).

Language in a policy refers to the "elimination period." Similar to a deductible, the elimination period is the length of time before benefits begin to cover expenses. Remember, the shorter your elimination period, the more likely you are to pay higher premiums.

Keep in mind, your policy will also refer to activities of daily living (ADL's). The ADL's define when you are entitled to receive benefits.


©2007, Kelly C. Ruggles
Kelly C. Ruggles, President of American Reliance Group, Inc., is a registered investment advisor. Mr. Ruggles is the author of "The Financial Playbook" for Retirement.

Mr Ruggles does not intend to provide personalized investment advice through this publication and does not represent that the strategies or services discussed are suitable for any investor. Investors should consult with their financial advisors prior to making any investment decisions.

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