Covering assets: long-term-care insurance is catching on.

• Author: MCKimmie, Kathy
• Position: Retirement Planning

ONE IN TWO WOMEN and one in three men who reach 65 will enter a nursing home. More will need home care or assisted living. Baby boomers are taking notice of these stark statistics--and their parents' increasing needs--and deciding to protect their own futures.

Partnership program.

Indiana is one of only four states with a long term-care insurance program that protects assets while the insured receives Medicaid benefits in a nursing home. For more than a decade, the Indiana Long Term Care Insurance Program--administered by the Office of Medicaid Policy and Planning, Family and Social Services Administration--has worked with private insurers to offer policies meeting specific requirements, called Partnership policies. Without the policy, individuals would have to "spend down" their assets to $1,500 or less, $2,250 per couple, before qualifying for Medicaid.

Teresa Eagan, owner of Long-Term Care Associates in Indianapolis, is sold on the Partnership policies and even teaches classes for other agents on how they work. Partnership plans have shown to be a real advantage, she says, because they provide asset protection, the premium is deductible at the state level, they require inflation protection, and buyers are more protected against premium increases because of the way the state makes insurers structure their risk pool.

One of the reasons the state enacted the Partnership program was to delay people's entry into the Medicaid program and potentially save tax dollars, or at least be cost neutral. Theoretically, a person spending down assets to qualify for Medicaid will enter the system at the same time as a person with a long-term-care policy with asset protection.

Most newer Partnership plans offer good assisted-living coverage and versatile home care, and some are starting to offer an "alternate plan of care" provision. That means the plan is negotiable. While the first long-term care policies covered only expensive nursing home care, they're much more comprehensive now.

Dan Baker, financial advisor with Innovative Financial Solutions in Bloomington, recommends long-term-care insurance to people in their 40s, and if they're in their 50s, he becomes "adamant" about it. "Most people in their 40s are getting it while they're still healthy and while it's relatively inexpensive." He suggests clients buy the minimum amount needed to get total asset protection. Some clients pay a little more to add a "return on premium" rider, which returns all...