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What You Need to Know About Long-Term Care Insurance


Every day I talk to people who are concerned about their loved one’s futures. There are so many questions we deal with: where will they live; how will the care be paid for; is it safe?


A larger percentage of our population is getting older faster than ever before, and at the same time, the population as a whole is reaching ages that we have historically never reached before. According to numbers recently released from the Census Bureau, within the next 15 years there will be more people over the of age 65 than minor children.


While our population ages, an unprecedented number of people will require long-term care services. These services can be provided at home, in an assisted living facility, or in a skilled nursing facility, but all of these options can be extremely expensive, especially when the services are needed for more than a short time.


A lot of the people I talk to think that private health insurance, or that the government, will pay for their long-term care needs. Unfortunately, more often than not that isn’t true. Generally, health insurance doesn’t pay for the costs of long-term care. Although Medicare does pay for some care, it’s limited to rehabilitation services and as such, only covers a maximum of 100 days. Medicaid is another government program which might provide some services for long-term care, but it can be difficult to qualify for, and may require you to spend a substantial portion of your assets before you qualify. An Elder Law Attorney, like us at Campen Estate Planning, can assist you with making the correct decisions if long-term care is needed in the most cost efficient manner.


Situations like this are the reason long-term care insurance came into existence. Although long-term care insurance is not a new product, in comparison to life insurance and other traditional forms of insurance, it is relatively new, and as such, we’re going to answer some of the questions I frequently get about long-term care insurance. To be clear, we do not sell insurance products and the decision of whether any form of insurance is appropriate for your family is a very personal decision, and one which should not be taken lightly.


Q: What is long-term care?


A: Long-term care is a term that describes the care you may need if you aren’t able to handle your activities of daily living (ADLs) on your own. The easiest way I’ve found to remember the activities of daily living is using the acronym “BEDTT” (bathing, eating, drinking, toileting, and transferring).


On one extreme, needing long-term care can be needing someone to do everything for you requiring you to be in a skilled nursing facility, and on the other extreme, just needing someone to assist you with getting out of bed and getting ready for the day. Obviously, this range can require different levels of care in different locations, and the costs associated with each level of care are very different. Q: What is long-term care insurance?

A: 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 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.


Every policy is different in what services it covers, how much it covers, and for how long it will cover. Some policies may even cover modifications to make your home more accessible, such as adding wheelchair ramps or grab bars to your bathroom. This is why it is so important to make sure someone qualified reviews your long-term care insurance policy before you need to utilize it as there is no blanket statement as to whether your needs will be covered based on the specific terms of your policy.


Q: How does long-term care insurance work?


A: Before your coverage kicks in, most policies require that you demonstrate you are unable to use some of your 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. In most cases, during the elimination period, you are required to pay for the coverage out of pocket, and you are required to be receiving the care you are asking the insurance company to pay for. After all, in the insurance company's mind, if you aren't receiving the coverage during the elimination period, you don't really need it and they shouldn't be required to pay for it.


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. Rather than a number of years, some policies have a dollar value maximum they will pay out. This takes into account the fact that different facilities differ dramatically in how much they cost so benefits may be available for a longer time period at a facility which is cheaper per month.


Q: When should you purchase long-term care insurance?

A: 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 may very well disqualify 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 MS or Parkinson’s

  • 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

That being said, it is not necessary to obtain insurance in your 30s or 40s. Many people can qualify for long-term care insurance at a later date and although the premiums may be more expensive, the fact that you have not paid for them for 10+ additional years could offset the increased premium.


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.


Q: How do I purchase coverage?


A: 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, consult with us and we can review the policy terms to ensure it’s a good fit for you before you sign on the dotted line.


Q: What are the most important elements in a long-term care policy?


A: When meeting with an insurance provider, it is recommended that you find out the answers to at least these 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 (or what is the lifetime maximum of the policy)?

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.


Q: Once I have a policy, how often should I review my coverage?


A: 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 may lose all of the money you invested and have no access to the benefits when you need them.


Long-Term Care Insurance Can Be A Key Component In Your Estate Plan

In addition to life insurance, a long-term care insurance policy can be 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.


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