It’s never too early to start planning. Why? Because the older we get, the more likely we are to need long term care, but the younger and healthier we are, the more affordable Long Term Care Insurance will be.
What exactly is long term care? It’s the type of help you need if you are unable to care for yourself because of a prolonged illness, accident or disability. Most Long Term Care Insurance policies pay benefits based on:
- The inability to perform at least two out of six Activities of Daily Living (ADLs) necessary for independent living, including: dressing, bathing, feeding, toileting, transferring and continence. Make sure you understand the difference between Incidental ADLs (iADLs) and ADLs.
- The other way many carriers pay benefits is if a covered person is certified to need continual supervision due to a severe cognitive impairment, including Alzheimer’s disease.
Most policies cover*:
- Home Care
- Assisted Living Facilities
- Nursing Home Care
- Therapist, Homemaker and Companion Services
- Adult Day Care
- Hospice Care
- Geriatric Care Manager
Long Term Care Insurance Myths
There are a few misconceptions about LTCI. Some people still call it “nursing home insurance” because that’s what LTCI started out as decades ago, but current policies are far broader than that. In fact, LTCI is a surefire way to stay out of nursing homes, thanks to home care benefits within the plan.
Another common myth:
Many people assume that long term care is covered by their health insurance, government healthcare program, Medicare or Medicare Supplement plan. Unfortunately, this is not the case. Medicaid does cover nursing home care, but only after you “spend down” your assets to low income levels. Until then, you are required to pay out of pocket for care. That’s why, for many, LTCI is the easiest, most cost-effective method of long term care planning. Learn more about Medicare and Medicaid.
Who Should Buy Long Term Care Insurance?
Not everyone needs or can afford a Long Term Care insurance policy, however, everyone does need a Long Term Care strategy. Long Term Care insurance allows you and your loved ones to execute a plan designed to protect retirement funds and assets. Family members will not need to worry about being a burden to other family members. It helps remove the questions and guilt that family members can experience over the care of a loved one. LTCI also helps relieve the financial burden of the growing cost of care.
A disadvantage of Long Term Care insurance is that premiums can be expensive. If a person purchases a Stand-Alone “Traditional” LTCI policy, the premiums may go up during the lifetime of the policy because the premiums are not guaranteed and are subject to future rate increases (side note, Hybrid Asset-Based Life/LTCI policies provide guaranteed premiums). If you never use your Stand-Alone LTCI policy after paying premiums for years or decades, some consider this to be a con. We disagree though because not using your policy means a chronic condition was not present at the end of a life.
Many financial professionals view LTCI as an essential part of a comprehensive financial plan. We provide LTC resource services to thousands of financial planners, accountants and attorneys around the country who ask us to help them review LTCI options for their clients. Is LTC coverage a smart choice for you? Let us help you find out!
How Do Clients Pay for Long Term Care Insurance?
When we work with them to choose a policy, their budget is one of the main considerations. We talk extensively with our clients about paying for LTCI. The first option we talk about is paying out of pocket, just like paying for any other insurance policy. Another option is using an IRA to pay for Long Term Care Insurance. Whether you have a Traditional IRA, Inherited IRA, or Roth IRA there are ways to use those funds to pay for LTCI. A third option is using Health Savings Account (HSA) funds. Clients with HSA accounts are often able to use those funds to pay for LTCI.
Overall, most of our clients combine these options in a way that’s best for them. We work with them, their accountant, their financial advisor, and others on their planning team to figure out how to get the best LTCI policy at the best price that makes the most financial sense.
To help determine if long-term care (LTC) insurance is right for you, we are offering a FREE informational guide. This is a comprehensive booklet that will answer many of your questions about LTC and assist you with your health care planning.
To help determine if long-term care (LTC) insurance is right for you, we are offering a FREE informational guide. This is a comprehensive booklet that will answer many of your questions about tax breaks and incentives for LTCI for federal and state taxes.