This is guest host Andrew Horowitz from The Disciplined Investor Podcast and today on “Money Girl” I will be discussing the basics of long term care insurance and tips on a new policy design that may actually be wallet friendly.

Are you approaching retirement age and wondering what you’ll do if you can no longer care for yourself or your spouse in the future? Maybe you have a parent that is starting to lose their mental faculties or might need someone to care for them soon.

There are over 77 million people in the United States classified as baby boomers that are just now turning sixty and are considering if retirement is an option. They make up 27.5% of the population. While many people don’t like to discuss the possibilities of what could happen in the future, it is something that needs to be discussed and planned for. Depending on what happens and what the person’s needs are, there are nursing homes, assisted living facilities, adult day care and at home assistance. These all have varying price tags associated with them, but the underlying reality is that none of them are cheap. Let's face it: Good care is expensive. Today, a nursing home can range from $150 to $300 a day - that’s an average of $70,000 or more per year. That is higher than many husbands and wives salaries...combined!

We do know one thing... health care prices will continue to rise, especially since the industry is expecting so many more clients with the baby-boomer generation transitioning into this stage of their life. That is why long-term care insurance has become so important and a significant component of the revenues for the insurance industry.

Remember, while you may not be in the age range to need the coverage just yet, there maybe someone older who will soon need to rely on you for care.

Long-term care insurance is coverage which provides the funds to cover the costs of assistance. Just as we have seen with other forms of insurance, the can be several different policy structures and varying ways to pay for it. There is an old African Proverb that says: “For tomorrow belongs to the people who prepare for it today." So, even if you don’t think you’ll ever need long term care or insurance to cover it, you might want to at least look into it because the future has a strange way of being, well uncertain...

Traditional long-term care insurance policies require one to pay a monthly premium which will pay for long term care should it ever be needed. Depending on your age and benefits of the plan, these are not cheap and can cost anywhere from $2,500 to $5,000 per year. To be honest, that is a lot of money to throw away on a plan that you “might use” or might not. This just seems like a hard pill to swallow. The good news is that there are plans that provide an alternative in case you don’t use the policy. Basically it combines some of the benefits of long term care insurance with a savings plan.

Since this is a relatively newer side to the industry, not every agent may have this in their product mix. But this newer Long Term Care insurance product design is getting a good deal of attention. It’s a policy that allows you to combine the features of life insurance and long term care into one. The main difference is that the premiums are all paid in one lump sum in order to provide the long term care protection and the component that provides for a refund of unused premium.

The process of obtaining this type of policy is fairly simple. You fill out an application, pay the one time premium which earns interest and can be used to cover future nursing expenses if needed.

Let’s look at an example. A person invests $70,000 into a long-term care policy. They have the added feature of a $70,000 money back guarantee if they choose to withdrawal/cancel their policy under certain conditions. Then, there the life insurance component that amounts to $118,073 in tax free payment for the beneficiary if the insured dies and $236,146 for the payment of long-term care benefit, as per the policy. The real benefit is that there is a feeling of relief knowing that you, or your loved one. will be taken care of - no matter what your health in the future and your family won’t have the burden of the expenses. The last thing I would want is to be burden on my family or put undo or stress on them.

Now, with so many different policy options out there how are you supposed to know if this is a good plan option or not? Here are some tips for navigating the insurance policy jungle. One thing you need to realize when dealing with the future is that it’s difficult to define your long term care need since it is unknown. Private insurance is expensive so be prepared, this market is continually changing and thus will have uncertainties to it. Remember to look at the policy details as there is the possibility for changes in the future as far as premiums and the potential benefits. Look to lock in everything that's possible.

Look for inflation protection. This may seem expensive when looking at the initial premium cost but may be less expensive than a five to ten percent increase over the next few years. Prices for assisted living and nursing homes vary across the country so look into prices in your area before selecting a plan. There are no guaranteed premium policies so be aware. Make sure the policy you consider covers assisted living, in-home care and nursing home care. Some policies will seem to cover all of these but by reading the fine print, you’ll find that they have stipulations.

It may seem confusing and exhausting but you can make your way through the insurance maze and out alive. Remember, you’re protecting yourself and your family for the future.

Cha-Ching …and that’s all for now. Courtesy of Andrew Horowitz, guest host of Money Girl’s Tips for a Richer Life. Thanks for tuning in to “Money Girl”. This is Andrew Horowitz sitting in for The Money Girl. Listen to my weekly podcast…The Disciplined Investor also available on iTunes.

As always, everyone’s situation is different, so be sure to consult a tax or financial advisor before making important financial decisions. This podcast is for educational purposes only and is not intended to be a substitute for seeking personalized, professional advice.

Thanks for listening!