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GOLDEN VALLEY, Minn. -- Nearly 13percentor 40 million Americans were age 65 and over in 2010 according to the U.S. Census Bureau. An estimated 7,000 boomers turned 65 each day in 2011.

Given these statistics, many people have purchased or will be considering the purchase of a long-term care insurance policy to help mitigate the risk of expenses for care later in life.

Dan Ament, Financial Advisor with Morgan Stanley Smith Barney in Wayzata, joined us on KARE 11 Sunrise to discuss the pros and cons.

Long-Term Care

$77,745 - The median annual cost of a private room nursing home stay according to a 2011 Genworth Cost of Care Survey. The median cost of in-home care assistance is at $43,472. In 20 years at a 5% inflation of health care costs that same nursing home stay would cost you $196,458.

Will you need long-term care? Two in five Americans turning 65 will need more than two years of care at an average cost of $68,000 a year, according to the Georgetown University Long-Term-Care Financing Project.

"My Medicare/Medicaid will provide for LTC" Medicare and Medicaid are designed to pay for hospitalization and physical health care, and generally do not cover the cost of long-term custodial care. While Medicare can defray the cost of some nursing home expenses as well as care at home, it only provides coverage for a limited time and is subject to restrictions. As for Medicaid, recipients must meet several financial eligibility criteria including spending down the majority of their assets. As a result, Medicare is typically a last resort for most individuals.

How does long-term care insurance work? LTC insurance generally provides coverage for those who are unable to perform 2 or more ADLs (activities of daily living) for a period expected to last at least 90 days. The cost of a policy is typically a function of the length and extent of coverage. The key variables to consider when buying a policy are: Benefit Amount, Benefit Period, Elimination Period and Inflation Riders.

How to keep LTC insurance costs down? Use LTC insurance to supplement your costs rather than pay them all. Consider a shorter benefit period and or longer elimination period. Review the inflation rider as this feature can increase premiums materially as well.

When should you apply for LTC insurance? 80 percentof LTC applications are age 64 or under. 54 percentare between the ages of 55 - 64. The average age for new long-term care applicants is 57, an age when many people are able to qualify for good health discounts. Conversely, the older you are, the more likely you might suffer from health conditions that would impact your coverage.

"Hybrid" LTC Products - Long-term care insurance is expensive and many people do not want to pay premiums for something they might not need. A hybrid product has the benefit of combining two products into one. If you don't use the long-term care insurance, you can still benefit from the life insurance or the annuity. While a two-for-one product may seem attractive, these products are not for everyone. For one thing, you may have less flexibility with a combined product than you would with a stand-alone product. Hybrid products may not cover home care or include inflation protection, for example. In addition, hybrid products may not offer enough long-term care coverage for what you need.

Sources (including excerpts):
http://online.wsj.com/article/SB10001424052970203961204577269842991276650.html?mod=WSJ_PersonalFinance_PF17

http://fa.smithbarney.com/amentgroup/whitepapers.htm

Dan Ament is a Financial Advisor with The Ament Group at Morgan Stanley Smith Barney located in Wayzata, MN and may be reached at 952-475-4302 or dan.a.ament@mssb.com.

Dan Ament is a Financial Advisor with The Ament Group at Morgan Stanley Smith Barney located in Wayzata, MN and may be reached at 952-475-4302 or .

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