With people living longer than ever before, more and more seniors require long-term healthcare services in nursing homes and assisted living facilities. However, such care is extremely expensive, especially when it’s needed for extended periods.
Traditional healthcare insurance doesn’t cover such services. 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 your assets before being eligible (or do proactive planning to shield your assets, which we can support you with). Long-term care insurance was created to address the gap in coverage.
First introduced as “nursing home insurance” in the 1980s, long-term care insurance is designed to cover expenses associated with long-term skilled nursing services delivered in a nursing home, assisted living facility, or other senior care settings. However, some of today’s policies cover care provided in your own home as well.
Such intensive care is required when you are no longer able to care for yourself, often at the end of your life. These policies cover the cost of skilled 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 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.
Many policies offer a 90-day elimination period, but others can be longer, shorter, or even have no elimination period at all. Of course, the shorter the elimination period, the more expensive the premium.
Additionally, long-term care policies typically come with a predetermined benefit period: the number of years of care it will pay for. A benefit period of three to five years, for example, is quite a common duration for such policies. Most policies also come with a cap on the dollar amount paid daily, known as a daily benefit amount.
Obviously, the younger and healthier you are when you buy the policy, the cheaper the premiums will be, so 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 coverage.
For example, if you have any of the following conditions, 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 or two 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 care services, which has led to a marked increase in such policies’ cost. At the same time, many insurers have been cutting back on the benefits their policies offer.
Given this, other types of hybrid policies are springing up. One increasingly 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 death benefit to your family when you pass away.
Suppose you are looking to purchase long-term care insurance. In that case, you should speak with multiple insurance providers and compare their benefits, care options, and premiums. Different companies may offer the same coverage and benefits, but they can vary dramatically in price. 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, get help from a fee-only planner, who is not compensated based on your choice of coverage. Or 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 sign on the dotted line.
When meeting with an insurance provider, you must get answers to 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?
Because you will need your family members to advocate for you and file claims, buying long-term care insurance should be a family affair. Given this, make sure your family knows what kind of policy you have, who your agent is, and how to make a claim.
What’s more, you should 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 as well.
Keep Your Policy Updated
You should review your long-term care policy 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 stop paying, even for a short period, you’ll lose all of the money you invested and will have no access to the benefits when you need them.
Reach out to us for support in finding the right long-term care policy for your particular situation. Long-term care insurance and life insurance are key components in your estate plan. When combined with the right estate 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 Ruberg Law PLLC. We don’t just draft documents; we ensure you make informed, empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session during which you will get financially organized and decide what YOU want for YOUR family. You can begin by calling our office today to schedule your Planning Session at no charge.