Have you ever thought about what you would do if you or a family member needed extensive long-term nursing home care? The cost of long-term care can be astronomical. It can wipe out a family's assets, sometimes in a matter of months.
The next thirty years will see more than half of Americans living with at least one chronic medical condition
Unfortunately, regular health insurance does not pay for long-term care. Most health insurance plans (including Medicare) do pay for short-duration nursing home stays and some brief in-home care, but when it comes to the extended nursing home stay, they won't be much help.
Some among us are lucky enough to have the assets to pay for any long-term care needs that arise. Others of us will qualify for Medicaid, which does pay for long-term nursing home care but only if the recipient is financially impoverished. It is that large American entity, the middle-class, who will find themselves in a quandary when it comes to paying for the costs of long-term care. To avoid this situation get a quote now from www.insureme.com.
Perhaps you have parents with failing health. Maybe your spouse's family has a genetic predisposition to dementia or Alzheimer's. Maybe you are simply worried about your own future and fear ending up sick and destitute. These are all valid reasons to think about a long-term care insurance policy.
According to America's Health Insurance Plans, AHIP, a national trade association representing private sector companies who offer health insurance to many Americans, the next thirty years will see more than half of Americans living with at least one chronic medical condition. The Alzheimer's Association estimates that by 2050, nearly 14 million Americans will be living with Alzheimer's.
What does a long-term insurance policy do?
It's important to realize that long-term care policies seldom pay for everything involved. Investigate beforehand and learn about the different types of policies available. The more a policy pays, the more it will cost in premiums. Also, the state of your health and your age will affect premium amounts even to the point of disqualifying you. Long-term policies involve many details that you should fully understand before you make your final decision.
Typical coverage on a long-term policy
Typically, you will find that most policies cover the following:
- Assisted living centers
- Nursing home care
- Health care at home
- Adult day care
Depending on what you can afford to pay and how many benefits you want, you will find additional coverage available. Long-term care insurance can help preserve your personal assets. It can help you keep your possessions so that your beneficiaries can inherit them. It can also give you more flexibility when it comes to choosing a nursing home and the type of care you receive.
Another bit of good news is that certain health reforms have made it possible to use your long-term care premiums and out-of-pocket expenses as medical deductions on your taxes (as long as all your medical costs exceed the federal threshold). Additionally, most benefits received by policyholders are not considered taxable income.
The limits and downsides of long-term care coverage
Before you run out, purchase a policy and give a sigh of relief, you should know the downsides of long-term coverage. The daily-monthly benefit limit:
On this type of policy, you will be asked to select a certain amount that will be paid on a daily or monthly basis. If the nursing home care costs then exceed that amount, you will have to pay the excess out of your own pocket. The maximum benefit limit:
Although every policy is different, most do have a maximum benefit limit. This simply means that if you continue to need nursing home care after your maximum limit is reached, either in dollars or length of time, you will have to pay for your care on your own, purchase another insurance policy (which might be very difficult to do) or apply for Medicaid. To qualify for Medicaid, you must first use up all your personal assets until there is hardly anything left.
Often, the long-term care policy will not begin to pay immediately. You will have to meet certain criteria in order for payment to begin. Typically, you'll have to prove that you can no longer take care of yourself without assistance. You might need to provide a doctor's written certification stating that nursing home care is required. Also, in some cases, you may have to prove mental incompetence. This will take precedence over whether you can physically care for yourself. The elimination period:
Even after you have faithfully paid your premiums and proven your legitimate need, the policy still may not pay right away. All policies are different, but many will not pay for a certain length of time even though you have moved into the nursing home and are receiving care. It is rather like an insurance deductible. Be sure to find out what the elimination period is on the policy you are considering, and determine whether you can cover those out-of-pocket costs on your own.
A few more drawbacks
If you are elderly or in poor health, you may find it next to impossible to purchase a long-term care policy. Companies who sell such policies prefer to sell them to young, healthy individuals.
Often, a long-term care policy will exclude certain pre-existing conditions and if those conditions land you in a nursing home, your policy will not pay. Some long-term care polices exclude certain medical conditions to all their policyholders.
Sometimes and with some policies, you will find that a hospital stay is mandatory before your policy will begin to pay.
As mentioned earlier, few long-term care policies cover the entire cost involved in an extended nursing home stay. The daily limit on your policy might be $100 while your nursing home charges $150. Whatever your policy excludes or has limits on, you are responsible for the excess amount.
Paying for a long-term care insurance policy might not be appropriate for everyone. If you have the money to pay a high premium on such a policy, you may want to consider investing that same premium amount a different way, such as mutual funds. You might even earn enough money to pay for long-term care by contributing regularly to a savings account.
Perhaps one of your family members could help pay for the nursing home care you need. Or, if you have a close circle of friends and family who are willing to help care for you in your declining years, you might not need to go to a nursing home.
If you think you may need a long-term care policy
If you think that because of your family history, your own health history or your circle of support that you will likely need nursing home care at some point, an insurance policy might be prudent.
Your answers to the following questions will help you decide whether a long-term care policy is right for you.
- Do you want to preserve your assets for your beneficiaries?
- Do you mind becoming a Medicaid nursing home patient?
If your loved ones are able to take care of themselves without your financial assistance, then you may want to spend down your assets on care, at which point you can take advantage of Medicaid.
If you own your home and are 62 or older, you can take out a reverse mortgage. This is money paid to you monthly from the built-up equity in your property, and is one method which could help pay for quality nursing home care. After your death, your home may go to the mortgage company instead of your beneficiaries, so that is a detail to consider.
Rating the insurance company
Before you sign up for a policy, check out the company. Three organizations that offer ratings on insurance companies are:
These organizations define the methods used to rate the insurance companies, describe the ratings given and what is taken into consideration when the rating is determined and provide Internet links that will take you to each specific insurance company website and let you know what rating it has received.
These ratings will help you determine the strength of the insurance company you are considering. Before you agree to pay premiums to a company, you need to know whether that company is likely to remain strong and viable. You will want to know if they can pay you when the time comes.
Before signing up for a policy
Find out what typical nursing home charges are in your area. Ask how often these rates increase and what the increase percentage usually is. This will help you decide what daily-monthly benefit limit to choose.
If you have already purchased a long-term care policy and have owned it any length of time, you may want to read over your coverage amounts and adjust your policy to keep up with inflation. In fact, if you wish, you can probably purchase a long-term care policy that has "inflation protection" written right in.
Make sure the policy you are considering has a premium waiver that takes effect if and when you enter a nursing home. If you don't have this option in your policy, you may have to go right on paying your monthly premiums even after you enter a nursing home, even after the policy begins to pay you.
Another option to consider would be a "third-party notice." This takes effect if there is an unexplained lapse in your premium payments. Before canceling your policy, the insurance company will notify a third party of your choice. If you have acquired dementia or some other mentally challenging illness that might have made you forget to pay your premiums, it could save your policy from cancellation.
A "step-down" option is one that will allow you to decrease your benefits if you need to reduce your premium payments due to financial distress.
Another good idea would be to talk to a financial planner, tax advisor, elder-law attorney or other expert about the various avenues available to you. These people will go over your assets with you and can provide invaluable tips on how to save your wealth and qualify for assistance.
Your state insurance commissioner's office can provide a list of companies licensed to sell long-term care insurance in your state.
You can also get more information on long-term care insurance in a brochure titled "Understanding Long Term Care Insurance," available from the American Health Care Association and the National Center for Assisted Living. You can download this brochure at www.longtermcareliving.com/prep/insurance/
Many websites exist that are geared toward baby-boomers. These contain helpful information about long-term care as well as a myriad of other subjects.