With people living longer than ever before, more seniors are requiring long-term healthcare services in nursing homes and assisted living facilities. However, such care is extremely expensive.
Traditional healthcare insurance doesn’t cover such services. Further, even though Medicare does pay for some long-term care, it’s quite limited, difficult to qualify for, and requires you to deplete nearly all of our assets before being eligible. To address, long-term care insurance was created.
First introduced as “nursing home insurance” in the 1980s, long-term care insurance is designed to cover expenses associated with long-term nursing services delivered in a nursing home, assisted living facility, or other senior care settings. Today, some of the policies cover care delivered in your own home as well.
Such intensive care is required when you are no longer able to care for yourself. These policies cover the cost of nursing services that support you with basic self-care tasks, such as bathing, feeding, and using the bathroom.
These are known as activities of daily living (ADLs) and generally include:
- Ambulating (walking or getting around)
- Dressing and grooming
- Using the toilet
- Continence management
- Getting in and out of bed or a chair
Before your coverage kicks in, most policies require that you demonstrate that you have lost the ability to engage in at least two or three ADLs. Most policies also have a deductible or an 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.
Many policies offer a 90-day elimination period, but others can be lengthier, briefer, or even have no elimination period at all. However, the shorter the elimination period, the more expensive the premium.
Additionally, long-term care policies typically come with a predetermined benefit period, which is a set number of years of care it will pay for. A benefit period of three to five years is a quite common duration for such policies. Further, most policies also come with a cap on the dollar amount of coverage that will be paid for care on a daily basis, known as a daily benefit amount.
The younger and healthier you are when you buy the policy, the cheaper the premiums will be. Therefore, the sooner you invest in coverage, the better. In fact, most policies exclude certain pre-existing conditions. Consequently, if you wait until you become ill, it can be impossible to find coverage.
For example, if you have any of the following ailments, it generally disqualifies 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 multiple sclerosis or Parkinson’s Disease
- 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
Increasing Premiums, Decreasing Benefits
With the elderly population booming, there has been a surge in demand for long-term nursing care services. This has led to an increase in the cost of such policies. At the same time, multiple insurers have been cutting back on the benefits their policies offer.
Given this, other types of policies are springing up. One popular type of hybrid policy combines long-term care insurance with life insurance. With this type of policy, if you don’t use the long-term care benefits, the policy pays a benefit upon your death to your family when you pass away.
If you are looking to purchase long-term care insurance, you should speak with multiple insurance providers and compare their benefits, health care options, and premiums. Different companies may offer the same coverage and benefits, but they can vary in price. You should 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, you should get help from a fee-only planner, who is not compensated based on your choice of coverage. If you are working with a commissioned agent, you should meet with a lawyer like us with experience in elder law, who can review the policy terms to ensure it’s a good fit for you before you.
When meeting with an insurance provider, you must ask the following 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?
Buying long-term care insurance should be a family affair, because you are going to need your family members to advocate for you and file a claim on the policy when you need to use it. Therefore, you should make sure your family knows what kind of policy you have, who your agent is, and how to make a claim.
You should also pre-authorize the right person to speak to the insurance company on your behalf, and not just rely on a power of attorney. That said, you should definitely have a well-drafted, updated, and regularly reviewed power of attorney on file.
Keep Your Policy Updated
Once you are in your 40s, your long-term care policy should be reviewed annually to evaluate new insurance products on the market and update your policy based on your current needs. Whatever you do, once you have a policy in place, make sure you don’t miss a premium payment, because if you stop paying you’ll lose all of the money you invested into the policy and will have no access to the benefits when you need them.
You can reach out to us, as your Personal Family Lawyer®, for support in finding the right long-term care policy for your particular situation. Long-term care insurance is a key component in your Will and Trust. When your long-term care policy is combined with the right Wills and Trusts planning vehicles, you can rest assured your family will be protected and provided for no matter what happens to you. Contact us today to learn more.
This article is a service of Levi L. Alexander, Personal Family Lawyer®. We do not just draft documents. We help to ensure you make informed and empowered decisions about life and death, for yourself and the people you love. This is why we offer a Family Wealth Planning Session™. During this session, 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 to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session for free.