Long Term Care Insurance is important to protecting your assets in the event you or your spouse must be housed in a long term care facility such as assisted living or a nursing home. This is not about providing for medical care expenditure coverage, but is about ensuring that non-medical assistance care can be paid. This is one of the types of care not covered by Medicare.
Although nursing home care may be covered by Medicaid there are two factors that make relying on Medicaid tough. First, you must be able to find a nursing home that (a) accepts Medicaid, and (b) has a Medicaid bed available. This means you could end up living far from friends and family and in a less desirable facility than you initially planned. Second, you must meet the income and asset test to get Medicaid to pay. Of course if your income and assets do not meet the test you can spend down to Medicaid qualifications by paying for your care to begin with.
Let’s talk for a moment about spending down to qualify for Medicaid. To do this you often will impoverish your spouse in the process. Most folks don’t want to go into a nursing home where they at the same time cause their spouse to have a drastic change in lifestyle. With law changes not so long ago the look back period used to evaluate assets is five years. What this means is you can’t give away assets in anticipation you will need them to pay for long term care, and then claim Medicaid eligibility, unless the gifting of the assets was more than five years ago.
Given that your medical insurance (if you are under 65), Medicare, Medicare Supplements, and Medicare Advantage Plans do not pay for your nursing home care (unless it is for medical reasons) you either pay yourself, qualify for Medicaid which is tough, or use your Long Term Care Insurance Policy to cover most if not all of the costs for your care.
Using the Long Term Care Insurance (LTCI) allows you more freedom in choosing where you want to live and how you get your care. Many using LTCI to cover costs of the care receive in home care. One thing I should point out is that LTCI may or may not cover all costs of the care. Each LTCI policy is built to custom specification that the agent and client discuss together. Some of the parts of the policy that must be customized are length of coverage, amount of benefit which can be defined as a daily or monthly benefit (there are differences) as well as percentage of coverage used for home care and the biggie inflation protection. Each of these components is important because it will dictate what level of benefit is available to pay or help pay for services you must receive.
In the event you want at all costs to remain in your own home for care, the cost is far greater than if you go to a nursing home, based on needing outside care to come in on a regular basis. In this instance you need to ensure the policy is set up where the benefits are set up where that in home care will be available and where nursing home care benefits are more secondary. Conversely if you would never think of in home care you can cut back on that benefit a bit and focus the benefits on ensuring maximum in nursing home care.
The policy is triggered by Activities of Daily Living (ADL), most policies trigger if there are two or more where you need assistance from someone with those ADLs. ADLs include dressing, transferring, toileting, eating, bathing, and maintaining continence. Help with these can be from trained aides, it doesn’t have to be from a registered nurse. In fact many folks during their elimination period (similar to a deductible although it is measured in days not dollars) have help from family and/or friends.
With the basic understanding of the long term care coverage options lets discuss why you really need it in more depth. First you can’t really rely, other than if you are willing to become impoverished first, on any government payments to cover your convalescent care needs. So you can pay out of your assets which if you are single may be just fine. I should say if you are single and don’t have plans to leave behind a legacy to your offspring, or perhaps you have none. In these cases it is possible you can pay as you go.
More typically you have a spouse or other family who depends on you for support or to whom you wish to leave behind a legacy. In these cases LTCI helps ensure you can still support your family and/or leave behind a legacy. In these cases you work together with an agent to provide for the amount of coverage you deem adequate to provide for coverage and to ensure you don’t bankrupt the family.
With a LTCI policy you secure coverage in amounts you choose whereby that same amount of money is no longer burned out of your own assets or income to pay for the care. Thus your family and friends are able to continue living with fewer financial affects of your moving into a long term care setting, or having extensive in home care. If you work from within your own home you may even be able to continue working depending on many factors which would then even put less negative financial impact on your family.
One thing I haven’t pointed out and many probably have not thought about, LTCI is not just for retirees, many folks under 50 are seriously injured, to the point they trigger the ADL requirements to start the policy paying out benefits. To that end and because the policies are typically less expensive if purchased while young, everyone at all stages of life should consider such a policy. I’m no oldie and have a policy on myself and one for my wife as well.
With the above it becomes apparent why it is important to have a LTCI. It helps ensure you get more choice in where your care is delivered, by whom, and puts less financial strain on your own family. These policies don’t have to be cost prohibitive and are best bought while you are young and still healthy. They do require a full underwriting process, so prior medical conditions may affect final pricing and ability to obtain coverage. It is something worth calling your agent to review.
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