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Asset Protection: Long Term Care Insurance

 

Long Term Care InsuranceThe average life expectancy for a person born in 1915 was 54 years, this number increased to 70 years in 1967 and 78 years in 2006.  Today people are living longer than they have in the past, the recent past.  Good news, right?  Not necessarily.  As our average life expectancy increases so does the chance that you will need long term care.  The Wall Street Journal has reported that a married couple turning 65 this year has a 70% chance of at least one person needing long term care.

There are primarily four different ways to protect yourself against long-term care issues.  The first plan would be to never ever ever get sick or hurt, or old for that matter.  This is the least advisable pan.  The second plan is to have lots and lots of children and send some of them to medical school, some to nursing school, and others to occupational and physical therapy schools, and hope for the best.  For a lot of folks this plan may not work either. The third plan would be to save enough money to pay for your long-term care.  For some people this plan is “do-able.”   For others, this may not be a realistic plan.  The costs can be staggering and there is no way to predict what the future cost will be.  The cost will vary depending on the care you need and the length of time that you need it. Currently, long-term care in Connecticut is approaching five figures per month.  The only other alternative is Long-Term Care Insurance.   

Long-term care is not solely for the elderly.  The need for this type of care can come on unexpectedly.  Long-term care insurance is a good way to plan for unexpected incapacity.  Long-term care insurance can provide medical care and other services.  These services can be provided in your home, in a nursing home, or in an assisted living facility.  This type of insurance helps people remain financially independent while guarding against the rising cost of long-term care.  That being said, it can be costly.  While this is true, you should consider the fact that one month in a Connecticut nursing home, at the private pay rate, would probably cost more than the yearly premium for a long-term care insurance policy.  We all pay our yearly fire insurance on our homes and we rarely use this insurance.  Many people will need nursing home care over the course of their lives; but most do not plan for this reality.  Statistics show that after the age of 65 you have nearly a 50% chance of requiring long-term care in a skilled nursing facility.  In Connecticut it can cost nearly $100,000 for a year of long-term care at the private pay rate.  Many homes have been sold, and many potential inheritances have been spent providing skilled nursing care.  You should weigh the cost of carrying long-term care insurance against the possibility of needing this type of coverage.

Many people believe their private health insurance or Medicare will pay for their long-term care.  Unfortunately, this is not usually the case.  Private health insurance and Medicare (generally speaking) will only pay for skilled care, not custodial care, and there are limits to the coverage periods.  For example, Medicare may pay for up to 100 days in a skilled care facility, but will only pay 100% of the cost for the first 20 days.

Lots of folks also think that Medicaid will pay for their long-term care.  This is true (well, sort of).  Medicaid will only pay for long-term care when a person has minimal assets.  When we say minimal we mean it.  The limits are not enough for a person to live on.  Medicaid expects you to pay for your own care until your assets reach a certain level, then when you are nearly broke they will offer assistance.  It is important to mention that if you are trying to place a person into a nursing home it is a good idea to have enough cash to pay for a few months of coverage privately.  The reason for this is that nursing homes only have to provide a percentage of their beds for Medicaid patients. This means that you may have to find a room in a facility that is not your first choice, and potentially far away from your loved ones.  However, if you have some money to spend there privately, you have a better shot of placement in a home of your choice, not just one that is willing to accept you.

If you cannot afford to privately pay for your own care, and most people cannot, then look into long-term care insurance.  If you can afford to privately pay for long-term care you should still look into long-term care insurance because you can probably preserve a lot of your own assets by having it.  We firmly believe that long-term care insurance is one of the best ways to protect assets, and at the same time provide you with peace of mind and quality care. 

There are many types of policies offering many different benefits, different waiting periods, different inflation protection, and different costs.  You should not take the purchase of a long-term care policy lightly.  Do your homework.  Make sure you know how long and how much the policy will pay, as well as what will trigger a payment from the policy.  You should also know if the policy is indexed for inflation.  Most importantly you should educate yourself on the level of care associated with the policy.  Is custodial care covered?  How about skilled nursing care?  Is home healthcare provided?  Check with several companies and agents and find the best policy for you, not the best policy for the agent to sell you.   Understand the policy you are purchasing.  Make sure you know what your policy covers and what it does not cover before you purchase it.  Caveat Emptor!

 

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