Kevin McCormally: I am Kevin McCormally of Kiplinger's, I am here with Mary Beth Franklin, Senior editor of Kiplinger's Personal Finance magazine. Today we want to talk about nursing home bills and more importantly long term care insurance. Mary Beth nursing home bills are astronomical these days, what can people do about them?
Mary Beth Franklin: It's right the average nursing home bill for this year is over $75,000.00 a year. You can see how a few years in a nursing home would wipe out any body's retirement savings.
Kevin McCormally: Okay, so what can people do about it? Does long term care insurance really help?
Mary Beth Franklin: It does because Medicare, it for the most part does not cover nursing home bills or any other kind of long term care at home or assistant living facility. And neither does medicate the program for the poor unless you spin down to poverty level, so all you have left is either paying at your pocket or insuring yourself with long term care insurance.
Kevin McCormally: Okay, how does long term care insurance work? And how do you find a good policy?
Mary Beth Franklin: Well, several factors affect the price of long term care insurance. The first is your age when you buy it? The younger you are, the cheaper it is going to be. But then again you are probably going to be paying that, there a lot longer.
Kevin McCormally: So in that way it's like case study of life insurance, the young your are the lower the premium but longer hopefully you pay it, before you die, here hopefully you pay it before you need long long term care.
Mary Beth Franklin: That's right. Secondly is how long your coverage or we have found for the most part that a 3 year policy will cover most people in a nursing home and that's a lot less expensive than say buying a 10 year old life time policy.
Kevin McCormally: That's because most people are not in nursing homes for more than 3 years, so a three year coverage period is enough to pay the bills, what they need paid.
Mary Beth Franklin: For most of the people, that's right.
Kevin McCormally: What about the daily benefit amount?
Mary Beth Franklin: It depends on where you live, if you are in a place like Canadaca where nursing homes are very expensive, you probably want to buy a $200.00 or $250.00 day benefit cover that. If you live in Mississippi you might get away with the $100.00 a day.
Kevin McCormally: Okay, the big question. What about inflation coverage, how implements there in a long term care policy?
Mary Beth Franklin: Inflation is crucial, particularly for somebody 70 years old or younger because you may not need this benefit for may be 20 years and imagine what a nursing home will cost that.
Kevin McCormally: What if you look at the policy and decide you can't afford what do you want. Where do you compromise, what do you cut out?
Mary Beth Franklin: We recommend that you go for short fat policy rather than a long skinny one. That means rather than buying a life time benefit with may be $100.00 a day coverage, you'd be better off buying a 3 year policy with adequate daily benefit and definitely inflation protection.
Kevin McCormally: Thank you very much, Mary Beth.
