It Pays to Know

What is Long Term Care Insurance (LTCi)?

Long term care insurance is a type of coverage available for people who potentially may require long term care over an extended period of time. Long Term Care can be very expensive and can quickly deplete your savings, assets and investments. (back to top)

How do you qualify for Long Term Care?

Individuals qualify if they can’t perform 2 out of 6 activities of daily living (ADL’s- Bathing, Eating, Toileting, Transferring, Dressing, or Incontinence).  Dementia, Alzheimer's and other cognitive impairments qualify as well as illness, accident or other disabilities. (back to top)

What services are covered by LTCi?

Services provided in the person’s home may include skilled nursing care, housekeeping services, meal preparations, occupational, physical and speech therapy, hospice and respite care.  Services provided in nursing homes, assisted living facilities and adult day care centers are also covered.  Home remodeling, residence retrofitting, transportation expenses and equipment purchases may also be covered under a long term care insurance plan. (back to top)

Why do I need LTCi?

The cost of long term care is very high and will continue to escalate as the decades go by.  According to a 2015 study by Genworth, the average cost of care in a nursing home in the USA is almost $100,000 per year!  Home health care around $50,000. What will those costs be in 20 years at 3% inflation rate?:  About $181,611 and $90,300 respectively. LTCi will help with those costs. (back to top)

Why should I buy LTCi?

  • Protection of Assets
  • Maintain your independence and choice
  • Avoid being a burden on your children
  • Avoid going on Medicaid
  • There are tax advantages
  • Medicare will not cover it after 100 days  (back to top)

How much coverage do you need?

You must first investigate what kind of care you might desire and where:  At home?  Assisted Living?  Nursing Home?  What costs are involved?  How long would you think you would like to receive that care? 1 year, 2 years, 4 years ,5 years or lifetime?  Do you want inflation protection?  How much in savings and assets do you have availble to cover those costs?  What would be in your budget? (back to top)

Who needs long term care?

Needing long term care can happen to anybody.  Young and old alike, may find themselves in need of such services.  Alzheimer’s, accident or a bad fall could leave you debilitated, unable to take care of yourself and in need of long term care. (back to top)

What is a Hybrid (Linked Benefit ) policy?

Many people are concerned that if they don’t need long term care, they had wasted all that money. But that is the nature of having insurance.  You hope you don’t need it but if you do, you are covered.  There are policies out there today that link either a life insurance policy or an annuity with a long term care rider that provides benefits to your heirs even if you never need long term care. (back to top)

What do I need to know about LTCi?

  • You need to be in relatively good health to qualify
  • LTCi is more affordable than you think (Many options)
  • Rates vary per insurer (need an independent broker who is fiduciary to his/her client)
  • Health qualifications vary per insurer
  • You get LTCi only once in your lifetime  (back to top)

What are the biggest mistakes I can make regarding planning for my long term care needs?

  • Waiting too long
  • Believing it won’t happen to you
  • Counting on our government (Medicare, Medicaid)
  • Not working with a long term care insurance professional (back to top)

When should I buy LTCi??

No matter how old you are, life circumstances can change, leaving you unable to care for yourself.  If you are over age 65, there is a 68% chance you will need long term care services in your lifetime.  The average age of a LTCi policy is 59 years.  But one must keep in mind that the need for long term care can happen to anyone.  The younger you are the more likely you are in better health and less likely to be declined for coverage.  Also the younger you are, the lower the premiums enabling you to get better coverage at a lower price.  It is not uncommon for individuals in their 40’s to obtain coverage. (back to top)

What are my LTCi options?

  • Traditional LTCi
  • Hybrid (Linked Benefit) LTCi
  • Single Premium LTCi
  • Partnership Programs
  • 1035 Exchanges
  • Short Term Care
  • Funeral Expense/Trust   (back to top)

What types of LTCi Policies are there?

  • Reimbursement (Most common): Payment is made for actual charges incurred
  • Indemnity: The entire daily benefit is paid out regardless of service incurred
  • Partnership: Program that protects assets and allows you to qualify for Medicaid  (back to top)

Are there tax advantages to buying LTCi?

If you are able to itemize medical expenses on your tax return and your medical expenditures are above 7.5% of your adjusted gross income, you can deduct an amount up to certain limits based upon your age.  Also, in most cases, long term care benefits are distributed income tax free.  Business owned policies are more tax advantaged.  You should always consult your tax advisor.     (back to top)

Will Medicare cover my long term care expenses?

After a hospitalization of 3 days and 3 nights, Medicare will cover a portion of the cost of a skilled nursing facility, usually up to 100 days, but does not cover custodial (non-medical) care.  Medicare also covers skilled care in the home, but not custodial. After that you are on your own. (back to top)

Does Medicaid cover Long Term Care expenses?

Yes.  Medicaid is the largest provider of long term care expenses (42%)  However applying for Medicaid has its drawbacks.  One, you have to spend down most of your assets to qualify. (Basically going  on Welfare) Two, you may not have choice as to where you want to go, Three, not all services are covered.  (back to top)

How does one pay for long term care?

There are 3 main options:

  • You are either very rich and you can self-fund your care,
  • You are very poor and go on Medicaid,
  • You get Long Term Care Insurance and have the peace of mind that you long term care needs will paid for (back to top)

What about LTCi for same sex partners?

There are long term care providers who will issue a variety of long term care insurance options to same sex domestic partners.  A shared care rider is also available as a benefit allowing you to use your partner’s benefit dollars if you happen to deplete yours.         (back to top)

What is the Partnership LTCi Program?

In order to lessen the burden of long term care expenditures through Medicaid, most States have enacted a “partnership” with the insurance industry allowing for more affordable LTCi policies, increasing use of insurance and lowering Medicaid costs.   (back to top)

What are the benefits of a Partnership LTCi Policy?

Besides some potentially lower premiums, a major advantage of the coverage is that it provides a dollar for dollar asset protection if one applies to Medicaid. (back to top)

Why should women be espcecially interested in LTCi?

  • Women stay in nursing homes twice as long as men
  • As they age, women are more likely than men to live alone
  • Women make up to 72% of the population over age 85
  • Women make up 75% of nursing home residents (back to top)

What are my chances of needing long term care?

There is a 50-50 chance that you will need long term care in your lifetime.  Compared to the odds of needing other types of insurance protection:

 

  • Homeowner’s (1 in 1200)
  • Auto Insurance (1 in 240)
  • Major Medical Insurance (1 in 15)
  • Long Term Care (1 in 2)   (back to top)

How much does LTCi cost?

LTCi costs can vary.  There are many options and riders available to choose.  Determining benefit periods, elimination periods, benefit amounts, inflation protection….will all affect the premium. Age and health are major factors.  Most people can afford some form of LTCi.  Depends on your budget.  A rule of thumb:  If your premium is over 7% of your adjusted gross income, you cannot afford the coverage.  (back to top)

How can I lower my costs of coverage?

  • Younger age
  • Discounts for good health
  • Spouse/Partner Discounts
  • Tax deductions
  • Group Discounts
  • Adjust Benefits accordingly
  • Annual Premium Payment  (back to top)