Over the years, I’ve worked with countless families. Many of them have been facing what we will probably face at some point: how to pay for nursing home costs, assisted living, or in-home care for an aging family member.
Rarely does anyone want to see their life savings spent on nursing home or similar care. For most people, any other option seems better than that. Estate planning that includes planning to pay for those costs provides some alternatives. And for some people, due to health or other reasons, estate planning may be the only option. But for many others, long term care insurance would be the best option. No one should overlook long term care insurance as they consider how they’re going to pay for care as they age. Just this week, I was reminded of the benefits and peace of mind given a family whose loved one planned ahead with long term care insurance.
Does Long Term Care Insurance Only Pay For Nursing Home Care?
No. Most long term care insurance policies cover the cost of care in a variety of settings, including in-home and assisted living in addition to the nursing home. In contrast, the estate planning/elder law planning options may only result in nursing home costs being covered by Medicaid. The in-home care and assisted living costs that may precede nursing home care remain subject to being paid out of our own savings. The insurance allows us more choices about where our care or our loved one’s care will be provided without incurring significant out of pocket expenses.
Does Long Term Care Insurance Protect Your Assets?
Long term care insurance can protect your assets in a couple of ways. First, it serves as the initial source of funds to pay for care. As a result, you aren’t dipping into your own pocket or your savings to cover the costs. If the cost of care doesn’t exhaust the benefits of the insurance policy, your savings may never be touched.
Additionally, if your insurance policy is part of the state’s long term care insurance partnership program, you get added asset protection. In addition to serving as the first source of payments for care, the insurance benefits paid for care will create asset protection (an asset disregard) in the event Medicaid is needed after exhausting the insurance policy benefits.
The partnership program policies work this way. If you have a policy that is part of the partnership program and it pays $200,000 in benefits before it is exhausted, Medicaid will disregard $200,000 of your assets when you apply for Medicaid. In other words, Medicaid will pretend that you don’t have $200,000 in assets that you really have. That means Medicaid won’t require you to spend the $200,000. Instead, you’ll keep it intact.
I’ve seen this in action recently, and the savings can be substantial. For the $200,000 policy, not only did the policy provide the first $200,000 to cover costs of care, the policy shields $200,000 of your life savings that Medicaid would have required you to spend before Medicaid starts paying. The combined benefit from this type of insurance is hard to ignore.
If You Don’t Use The Insurance, Are You Wasting Your Money?
No, although that is a common concern. When you buy insurance, you are buying a promise: the promise that protection is there if you need it. But do we really want to need this insurance? Probably not.
We would all prefer to live a long, healthy life that never requires in-home, assisted living, or nursing home care. But that is not likely. We know that we’ll probably need care in some or all of those settings. This insurance protects us when that happens.
The scenario with long term care insurance is similar to our automobile insurance and homeowners insurance. We may never file a claim on either of those insurance policies. Yet from the time we’re 16 years old, we’ll probably pay automobile insurance premiums. We don’t think we’ve wasted those premiums simply because we haven’t had a wreck. Instead, we’re glad we haven’t had a wreck. The same holds true for our homeowners insurance except we probably didn’t start paying homeowners insurance premiums until much later in life. Either way, though, we’re happy that we didn’t have to file a claim.
Also, there are many types of long term care insurance policies and several types of insurance that include coverage similar to long term care insurance. To learn about the variety that may be available to you, your financial advisor or a dedicated long term care insurance agent can help. Some policies are similar to your automobile insurance or homeowners insurance described above. With long term care insurance policies like those, there isn’t any remaining or residual value in the policy at death. Other policies containing benefits similar to long term care insurance may retain some residual value at death. You will hear them called hybrid policies.
How Do You Determine If Long Term Care Insurance Is Right For You?
You should get your estate planning/elder law attorney and your financial representative/insurance agent working with you and one another. As a team, you’ll discover what options are available to you and the benefits and costs of those options, and you’ll determine which is best for you. One of the most common regrets I hear when I ask if someone has long term care insurance is that they didn’t look into it soon enough. Our health affects whether we can qualify for the insurance, so don’t delay. Determine today that you will explore the long term care insurance options available to you. You don’t want the regret of having missed a good opportunity simply because you waited too long. I’m here to work with you and your financial representative/insurance agent on this journey. Contact us to get started.