With the booming aging population, more and more seniors will require long-term healthcare services, whether at home, in an assisted living facility, or in a nursing home. However, such long-term care can be extremely expensive, especially when it’s needed for extended periods.
Moreover, many people
mistakenly believe that their health insurance or the government will pay for
their long-term care needs. But the fact is, traditional health insurance
doesn’t cover long-term care. And though Medicare does pay for some long-term
care, it’s typically limited (covering a maximum of 100 days), difficult to
qualify for, and requires you to deplete nearly all of your assets before being
eligible (unless you use proactive planning to shield your assets).
To address this gap in
healthcare coverage, long-term care insurance was created. Since such insurance
is fairly new, we’ll answer some of the most frequently asked questions about
these policies to help you determine whether you (or your loved ones) could
benefit from investing in long-term care insurance coverage as part of your
estate plan.
What is long-term care?
Long-term care is a
general term that describes the type of care or support you need when you are
no longer able to handle activities of daily living (ADLs) on your own. ADLs
include things, such as getting dressed, bathing, eating, and using the
bathroom.
In some cases, long-term
care might simply mean that you have someone assist you in your own home with
getting ready in the morning and before bed at night. In other cases, long-term
care might mean you move into a nursing home to recover from surgery or manage
a chronic medical condition.
What are the different types of
long-term care?
Long-term care services
typically fall into two categories: personal care and skilled care. Personal
care, also known as custodial care, is for people who require assistance with
non-medical activities, including the following:
ADLs such as dressing,
grooming, bathing, and eating.
●
Instrumental
activities of daily living (IADLs), such as grocery shopping, meal prep, and
laundry
●
Companionship
●
Supervision
●
Transportation
Skilled care, or skilled
nursing care, is for people who require skilled medical care or rehabilitation
services, including:
●
Medication
management
●
Vital sign
monitoring
●
IV treatments
or feedings
●
Occupational,
physical, and speech therapy
●
Wound care
●
Mobility
assistance
What is long-term care insurance?
First introduced as
“nursing home insurance” in the 1980s, long-term care insurance is designed to
cover the expenses related to your long-term care in the event you are no
longer able to handle your own ADLs.
These policies cover the
cost of both personal care and skilled care services whenever and wherever you
plan to receive care, whether in your own home, an assisted living facility, a
nursing home, or a community care facility. Some policies even cover modifications
to make your home more accessible, such as adding wheelchair ramps or grab bars
to your bathroom.
How does long-term care insurance
work?
Before your coverage kicks
in, most policies require that you demonstrate you have lost the ability to
engage in at least two or three ADLs. Most policies also have a deductible, or
“elimination period,” which is a set number of days that must elapse between
the time you become disabled (eligible for benefits) and the time your coverage
kicks in.
Many policies offer a
90-day elimination period, but others can be longer, shorter, or even have no
elimination period at all. Of course, the shorter the elimination period, the
more expensive the premium. Additionally, long-term care policies typically come
with a predetermined benefit period, which is the number of years of care it
will pay for.
For example, a benefit
period of three to five years is a quite common duration for such policies.
Most policies also come with a cap on the dollar amount of coverage that will
be paid for care on a daily basis, known as a Daily Benefit Amount.
When should you purchase
long-term care insurance?
Obviously, the younger and
healthier you are when you buy the policy, the cheaper the premiums will be, so
the sooner you invest in coverage, the better. In fact, most policies exclude
certain pre-existing conditions, so if you wait until you become ill, it can be
impossible to find coverage.
For example, if you have
any of the following conditions, it generally disqualifies you from obtaining
coverage:
●
You already
need help with ADLs
●
You have AIDS
or AIDS-Related Complex (ARC)
●
You have
Alzheimer’s Disease or any form of dementia or cognitive dysfunction
●
You have a
neurological disease, such as multiple sclerosis or Parkinson’s Disease
●
You had a
stroke within the past year to two years or have a history of strokes
●
You have
metastatic cancer
●
You have
kidney failure
According to the American
Association for Long-Term Care Insurance (AALTCI), the best age to apply for coverage
is before you reach your mid-50s. Beyond that age, your health is unlikely to
improve significantly, so waiting longer will typically increase your premiums,
or you may even become ineligible before acquiring a policy.
How do I purchase coverage?
If you are looking to
purchase long-term care insurance, you should speak with multiple insurance
providers and compare their benefits, care options, and premiums. Different
companies may offer the same coverage and benefits, but they can vary
dramatically in price. Always ask about the insurance company’s history of rate
increases, including the amount of the most recent increase.
For the best chances of
success when shopping for a policy, get help from a fee-only planner, who is
not compensated based on your choice of coverage. Or, if you are working with a
commissioned agent, we can review the policy terms to ensure it’s a good fit
for you before you sign on the dotted line.
What are the most important
elements in a long-term care policy?
When meeting with an
insurance provider, you must get answers to the following three questions about
your policy:
- How
long is the elimination period before the policy begins paying benefits?
- What capacities, or ADLs, must you lose before coverage kicks in?
- How many years of care are covered?
These are the most
important elements in a long-term care policy, and as such, they will make the
biggest difference in the quality of coverage and the amount of your premiums.
Can I buy coverage for my
parents?
Yes, you can buy long-term
care insurance for your parents. You will pay for the policy, and then have
your parent(s) listed as the beneficiary. If you know you are going to be the
primary caregiver for your aging parents, investing in a policy for them can
help offset the expenses related to their long-term care.
Furthermore, buying
long-term care insurance should always be a family affair, because you are
going to need your family members to advocate for you and file a claim for the
policy when you need to use it. Given this, make sure your family knows what
kind of policy you have, who your agent is, and how to make a claim.
What’s more, you should
pre-authorize the right person to speak to the insurance company on your
behalf, and not just rely on a medical power of attorney. That said, you should
definitely have a well-drafted, updated, and regularly reviewed medical power
of attorney on file as well.
Once
I have a policy, how often should I review my coverage?
Once you are in your 50s,
your long-term care policy should be reviewed annually to evaluate new
insurance products on the market and update your policy based on your changing
needs. Whatever you do, once you have a policy in place, make sure you don’t
miss a premium payment. If you fail to pay, even for a short period of time,
you’ll lose all of the money you invested and will have no access to the
benefits when you need them.
A Key Component In Your Estate Plan
Meet with us for guidance
and support in finding the right long-term care insurance policy for your particular
situation. In addition to life insurance, a long-term care insurance policy is
a key component in your estate plan. When combined with the right estate
planning strategies, you can rest assured that your loved ones will be
protected and provided for no matter what happens to you.
We view estate planning as
much more than just planning for death, which is why we call it Life &
Legacy Planning. Ultimately, it’s all about your life and the legacy you are
creating by the choices you make today. Contact
us today to learn more.
This
article is a service of Ganvir Law, Personal Family Lawyer®. We do not just
draft documents; we ensure you make informed and empowered decisions about life
and death, for yourself and the people you love. That's why we offer a Family
Wealth Planning Session™, during which you will get more financially organized
than you’ve ever been before and make all the best choices for the people you
love. You can begin by calling our office today to schedule a Family Wealth
Planning Session and mention this article.