Estate planning, when done properly, accomplishes much more than just the division and distribution of estate assets at the end of your life. One important additional component to any comprehensive estate plan should be long-term care planning. If you fail to anticipate the need to pay for the cost of long-term care (LTC) it could completely derail your entire estate plan down the road. One option for covering the high cost of LTC is to purchase a LTC insurance policy. To help you better understand that option, the Sunset Hills elder law attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC explain how long-term care insurance works as well as some of the factors to be considered when shopping for LTC insurance.
Will You Need Long-Term Care?
We may all hope to avoid spending time in a LTC facility when we are older; however, given the odds of needing LTC, it is best to plan for the possibility. When you enter your retirement years, around age 65, you stand about a 50 percent chance of one day needing LTC. If you are still here at age 85, those odds increase to a 75 percent chance of ending up in a nursing home or other LTC facility prior to your death – and the cost of that care, should you need it, could deplete your retirement nest egg in record time. Nationwide, the average cost of LTC is over $80,000 per year as of 2017. As a resident of Missouri, you are fortunate in that you will likely pay less than the national average; however, you can still expect to pay, on average, $65,000 per year for LTC. Moreover, the average length of stay in LTC runs 2.5 years, bringing your expected expenses to over $150,000 for an average long-term care bill. As a senior, you will likely rely on Medicare for most of your healthcare related expenses. Unfortunately, however, Medicare will not cover LTC expenses nor will your average health insurance policy. You can purchase a separate LTC insurance policy; however, be sure you understand what you are purchasing before doing so.
Understanding LTC Insurance
Long-term care insurance, as the name implies, is a separate insurance policy that specifically covers costs associated with LTC. Like other types of insurance, a LTC policy can be complicated to understand, and no two policies are exactly the same. It is imperative that you are clear about the benefits offered by a policy before you commit to purchasing it. To begin with, you need to be clear on what the policy covers. For example, a LTC insurance policy may cover any, or all, of the following:
- Nursing home care
- Home health care
- Respite care
- Hospice care
- Personal care in your home
- Services in assisted living facilities
- Services in adult day care centers
- Services in other community facilities
By the same token, you need to be very clear on the policy’s limitations – and every LTC policy does have limitations. For example, most LTC policies will not cover:
- A mental or nervous disorder or disease, other than Alzheimer’s disease or other dementia.
- Alcohol or drug addiction.
- Illness or injury caused by an act of war.
- Treatment in a government facility or that the government has already paid for.
- Attempted suicide or intentionally self-inflicted injuries.
- Care or services outside of the United States
Questions to Consider
Along with the outright limitations a policy may impose, there are several other questions you need to ask before deciding to purchase a LTC policy, such as:
- How much will you end up paying over the lifetime of the policy? It only makes sense to purchase LTC insurance if doing so saves you money in the long run. Premiums increase the older you are when you take out a policy so the younger you are when lock in a rate, the better. Except, the younger you are when you purchase a policy the longer you will pay on that policy. Do the math before you commit to purchasing a policy.
- Does the rate ever increase? Make sure there are no circumstance under which the rate can increase.
- Is there a waiting period during which time the policy will not cover expenses?
- Does the policy have an annual or lifetime maximum?
- Does the policy terminate at a specific age or after a specific number of years?
- Will the policy cover you outside of the U.S.? If not, are you planning to remain in the U.S. when you retire?
For many seniors, Medicaid planning is a better alternative to purchasing LTC insurance. Consult with your elder law attorney about which option is best for you and your circumstances.
Contact Sunset Elder Law Attorneys
If you have additional questions or concerns about long-term care insurance, contact the experienced Sunset Hills elder law attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.