Now, more than ever, our nation’s population is aging at the fastest rate ever, and collectively are living much long than previously. According to Census Bureau projections, by 2034, seniors (age 65 and older) will outnumber children under age 18 for the first time in U.S history.
With that being said, an increasing number of seniors will be needing long-term healthcare services, whether at home, in an assisted living facility, or in a nursing home. However, these all come with a hefty price tag, especially for extended periods of time.
Now, while one would think that their health insurance or the government will cover the cost of their long-term care needs, they would be mistaken. Traditional health insurance doesn’t cover long-term care, and while 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 meeting those requirements unless you use proactive planning to shield your assets. We can support you in setting up that planning if it is important to you and your family.
Long-term insurance was created to address this gap in traditional coverage. Due to such insurance being new, we will answer some of the most frequently asked questions about these policies to help you determine whether you or a loved one could benefit from investing in long-term care coverage as a part of your Will and Trust.
Q: What is long-term care?
A: 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.
It can look like having someone assist you in your own home with getting ready in the morning and before bed at night. It could look like moving into a nursing home to recover from surgery or manage a chronic medical condition.
Some common activities of daily living (ADLs) include:
- Ambulating (walking of moving around)
- Continence management
- Dressing and grooming
- Getting into and out of bed or chairs
- Using the restroom
Q: What are the different types of long-term care?
A: 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 bathing, dressing, eating, and grooming
- Instrumental activities od daily living (IADLs), such as grocery shopping, laundry, and meal preparation.
Skilled care, or skilled nursing care, is for people who require a skilled medical caregiver or rehabilitation services, including:
- IV treatments or feedings
- Medication management
- Mobility assistance
- Occupational, physical, and speech therapy
- Vital sign monitoring
- Wound care
Q: What is long-term care insurance?
A: 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 are designed to cover both personal and skilled care services whenever and wherever you plan to receive care. This could be at home, in an assisted living facility, a nursing home, or a community care facility. Some policies even include modifications to make your home more accessible such as adding wheelchair ramps or grab bars in your bathroom.
Q: How does long-term care insurance work?
A: 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.
A common elimination period is 90 days, but others can be longer or shorter, or even have no elimination period at all. Naturally, the shorter the elimination period, the more expensive the premium is. Furthermore, long-term care policies typically come with a predetermined benefit period, which is the number of years of long-term care that they will pay for.
A common benefit period is a duration of three to five years. Many policies also list a cap on the dollar amount of coverage that will be paid for care on a daily basis, referred to as a Daily Benefit Amount.
Q: When should you purchase long-term care insurance?
A: As with life insurance, the younger and healthier you are when you buy the policy, the cheaper the premiums will be. Thus, 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 suitable coverage.
General conditions that can disqualify you from long-term care insurance include:
- 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 (MS) or Parkinson’s Disease
- You have had a stroke withing the past one to two years, or have a history of strokes
- You have metastatic cancer
- You have kidney failure
The best age to apply for coverage is before you reach your mid-50s, according to the American Association for Lon-Term Care Insurance (AALTCI). Beyond that age, your premiums will typically increase due to your health not being very likely to improve. You may even become ineligible before acquiring a policy if you wait too long.
Q: How do I purchase coverage?
A: Speaking to multiple insurance providers and comparing their benefits, care options, and premiums is a good place to start when you begin shopping for a policy. Similar policies can vary dramatically in price across different companies. Additionally, asking about the insurance company’s history of rate increases, and the amount of their most recent increase, is a must when looking into a policy.
Going to a third party, such as a fee-only planner, is a great way to get help choosing a policy because they will not be compensated based on your choice of coverage, and thus be looking out for your best interests. Or, when working with a commissioned agent, you can consult with your Personal Family Lawyer®, who has experience in elder law, 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: There are three questions that you must get answers to when you meet with an insurance provider:
- How long is the elimination period before the policy begins paying benefits?
- What capacities, or ADLs, must you loose before the 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.
Q: Can I buy coverage for my parents?
A: 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.
To begin with, buying long-term care insurance should always be a family affair, as you are going to need your family members to advocate and file a claim for the policy when you need it. Thus, it is crucial to inform your family what kind of policy you have, who your agent is, and how to make a claim.
In fact, you should pre-authorize someone of your choosing to speak to the insurance company on your behalf. It’s best not to just rely on a medical power of attorney, and choosing the right person to represent you is crucial. This is not to say that a medical power of attorney is unimportant; it is vital to have a well-drafted, updated, and regularly reviewed medical power of attorney on file as well.
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’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 your Personal Family Lawyer® for guidance and support in finding the right long-term care insurance policy for your particular situation. Long-term car insurance should work hand-in-hand with life insurance as key components in your Will and Trust. Paired with proper Wills and Trusts planning strategies, you can feel at ease knowing that you and your loved ones are protected and provided for no matter what happens to you.
Ultimately, it’s all about your life and the legacy you are creating by the choices you make today. Contact us, your Personal Family Lawyer®, today to learn more.
This article is a service of Levi Alexander, 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 to find out how to get this $750 session at no charge.