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Roy Smith: Longterm care insurance

A thread on the “Farm Business” talk page concerned long term care insurance and whether it was appropriate for farmers. I will share my experience on the subject from a farmer’s standpoint. Sharon and I each had a parent that had Alzheimer’s and spent time in a nursing home. We have always felt that the odds of one of us getting the condition were pretty high and that there was some probability of both getting it. As a result we spent considerable time studying the subject before we put our money on the line for insurance. 

We began the quest for information in the late 1990’s. Sharon turned 60 in 1999. We were glad we started gathering information when we did because it took a lot longer than we anticipated. In the end, it took about a year to adequately understand the subject. 

One of the first things we discovered is that a lot of insurance agents did not know much more than we did.  The first obstacle we had to overcome was finding someone who really knew the subject. It was frustrating to start asking questions, only to find out that we knew more about it than the person we were asking. 

Another thing we quickly discovered is that you cannot afford to cover everything you might want. You need to decide what the biggest risks are and be sure those are covered. We knew that we would be able to easily pay for a short stay in a nursing home with our liquid assets. Therefore we wanted a policy with a long exclusionary period. This is like the deductable on your property insurance. We both have social security which would be available to pay the cost of care. So, that amount could be subtracted from our coverage. In our cases, that amounts to roughly $50 per day or $1500 per month. Therefore, we looked for a policy that would pay $80 per day. That was roughly the nursing home cost at the time we started the policy. 

We figured that the biggest risk was in needing care for a very long time. Therefore, we wanted the escalator clause that increased the coverage by five percent per year. With the policy in force for 12 years the coverage is now $143 per day. This, plus the social security payment, would still cover the cost of care.

A concern of those who posted on the talk page was whether the nursing home of the individual’s choosing would be covered by the policy. We requested and got a statement from the insurance company that they would cover the cost of care in the specific facility that we will use when the time comes. 

Finally, we decided to buy our insurance from an agent in a small town bank whose own mother-in-law was collecting on her long term care policy at the time. He knew the business from personal experience. We found that the premium costs go up sharply when you reach 60 years of age. Therefore we started the policy shortly before Sharon reached that milestone.  There was a ten percent discount for both partners to buy the insurance and another ten percent discount for being in good health. 

By starting the coverage early and taking advantage of all the discounts, we were able to get coverage for a price that we could easily handle without feeling we were insurance poor. The company has since raised the premium one time. They can do that legally, as long as it is done across the board for all policy holders. However, in my opinion it is still reasonable.  

I think of situations I know about where a nursing home stay has been very long and the cost was a burden to the family and the farming business. As with marketing, there are tools available to cover the risk of that long term care causing major financial damage to the farming operation. It was frustrating to Sharon and I that it took so much effort to finally find the program that fit our needs. On the other hand, it is reassuring to know that in the 12 years the policy has been in force it has worked as planned. 

I have an aunt who is nearing 100 years of age who has been in a nursing home for more than five years. I had another who passed away at 100 years and was active to the end. That is the best kind of long term plan I could ask for. There is no guarantee that my own situation will work that way!

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