Long-Term Care Insurance – Is it an Option for You?

Ruder Ware
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As our aging population grows so does the cost of nursing homes, assisted living facilities, and in-home care services.  Contrary to popular belief, Medicare will only cover certain short-term stays and typically will not cover non-rehabilitative long-term care.  This leaves many elderly and disabled individuals with few options for covering costs.  Often, at first, family members attempt to help.  When additional assistance is needed, in-home service providers may supplement family support.  However, once an individual can no longer live independently in their home, care costs become increasingly of concern.

A few ways to pay for care include private payment, veteran’s benefits, relying on family to pay for or provide care, public benefits (such as Medicaid), or a combination of these.  Many people worry that if they privately pay for care, at some point they will spend all of their money, leaving them with little to no money and limited options related to the care they receive and the legacy they are able to provide.  In crafting a plan for long-term care expenses, long-term care insurance is an additional option some individuals utilize to offset all, or a portion, of their care costs.    

How does long-term care insurance work?

With long-term care insurance, the insured either pays premiums over time or pays one large lump sum to the insurance company.  When the time comes that care is needed the long-term care policy pays for all, or a portion, of that care.  All policies have limits on the amount of coverage (dollars per month) and the length of coverage (typically stated in years) which are terms of the particular insurance contract.  Therefore, the cost and length of care needed will significantly impact the effectiveness of the long-term care insurance. 

Do all providers and facilities take long-term care insurance for payment?           

Long-term care insurance is seen as similar to private payment.  It is accepted by most in-home services, assisted living, and nursing homes. 

Because Medicaid pays less for services than individuals privately pay, certain facilities will not take Medicaid patients or will limit the number of Medicaid patients they will service.  Having long-term care insurance may provide options for care at facilities where public benefits are not accepted. 

What if I purchase long-term care insurance, but never need it?

Historically, policies had a “use-it-or-lose-it” sort of benefit.  Now, it is common to see “hybrid” policies where the long-term care policy is wrapped into a life-insurance policy.  If the insured passes away without ever using the full benefit, a hybrid policy may provide a death benefit.  This is definitely something to look at with the policy options and to discuss with a qualified insurance agent.

Is there anything that could stop me from getting long-term care insurance?

There are two major barriers to obtaining long-term care insurance.  The first is eligibility.  Most insurance companies require a rigorous screening process including a full medical and medication history, along with a cognitive assessment.  As is human nature, when it comes to insurance, many people procrastinate.  They wait too long to look into coverage options.  By the time the person fills out an application, coverage is denied or the insurance provider may require prohibitively high premiums given the individual’s health history.

A second major barrier to long-term care insurance is cost.  Although the insurance may lessen the financial burden on the family and protect retirement savings from depletion if long-term care is needed, most people do not have a crystal ball to know whether they will need long-term care.  The longer a person waits to apply, the higher the cost may be.  Committing to high monthly premiums can make the decision difficult.  Some people start off strong by consistently making monthly payments (or yearly, depending on the policy’s requirements), but then they miss or stop making payments for a variety of reasons.  Also, due to cognitive health issues, some elderly individuals may neglect to continue paying on long-term care policies.  Alternatively, making a large, lump-sum payment can also be a heavy or unrealistic burden.

Final thoughts to consider:

When considering buying long-term care insurance, age, financial status, health, marital status, and overall retirement objectives must be considered. As each policy provides unique coverage, careful research into the options should be conducted before you decide to purchase. Long-term care insurance is not for everyone; however, discussing how long-term care insurance may fit into your overall goals and finding the right insurance agent to describe the policy options is something to consider.  An experienced trust and estate’s attorney can steer you in the right direction and can also provide other pre-planning options to consider and/or supplement long-term care insurance. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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