Health Care Planning

by Jack Lantis

Let's face it, we're all getting older ... and like it or not, we must be prepared to handle the additional financial responsibilities that can come with age, such as extended health care.

If you think you're immune from this possibility, consider this: The National Institute on aging recently noted that more than 20 percent of the U.S. population will be age 75 or older by the year 2030, compared with only 12.6 percent in 1990.

Also, the Health Insurance Association of America estimated that by the year 2000, more than 8 million Americans aged 65 or older will probably need some form of long-term care.

Advance planning for the possibility of long-term care allows you to choose from several financial options:

?Self-insurance. To self-insure is to designate particular savings and investments for long-term care to protect your net worth during retirement.

Individuals with assets easily convertible to cash can plan for long-term care by setting aside a special fund, such as a mutual fund, an annuity or a life insurance policy, that is allowed to accumulate until illness occurs.

The primary advantage of self-insurance is that if you never require long-term care, your money will be available for other purposes. Its biggest drawback is the risk of running out of money planned for this purpose.

Self-insurance is usually a viable and cost-effective alternative for younger individuals who have a number of years to accumulate enough funds.

?Long-term care insurance. This type of insurance offers specialized protection against the high costs of extended health care. In exchange for a monthly premium, most policies pay a fixed dollar amount per day for nursing home or home health care costs.

Because of its associated costs, long-term care insurance is designed to protect both your assets and your lifestyle during retirement. But similar to other types of insurance, if you never require long-term care, you will never see a return for premiums paid.

If you have an estate that you wish to preserve, particularly if it is tied up in hard assets, such a real estate or a business, long-term care insurance can be a cost-effective form of financial protection.

?Hybrid life insurance. As the name implies, this unique type of life insurance effectively combines long-term care protection with a life insurance death benefit. As a policyholder, if you qualify for extended health care, the value of your death benefit is available immediately to pay for covered services.

Moreover, the benefit value of your policy will be increased up to 200 percent of the initially specified death benefit to help you meet these expenses.

If you use your death benefit to cover convalescent care, the unused portion of it will be paid to your beneficiaries.

Even if the entire death benefit has been used for convalescent care services, a residual benefit equal to 10 percent of the original specified amount will still be redeemable upon your death.

Also, if you require supplemental life insurance to provide for a dependent, this type of policy can be an excellent means of maximizing your assets.

The funding of long-term care can be a complex matter, but proper planning can help prepare for the possibility. After all, the better care you give to your financial plan now, the better care you can receive from your finances later on.

(Jack Lantis is an investment broker with A.G. Edwards & Sons Inc. in Springfield.)

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