Although the primary focus of your estate plan may be to ensure that your estate assets are distributed according to your wishes after you are gone, another important component of a comprehensive estate plan is long-term care planning. The high cost of nursing home care, and other types of long-term care (LTC), in the United States makes planning ahead imperative. One way to do that is to purchase an LTC insurance policy. For those who are contemplating the wisdom of purchasing LTC insurance, the Port St. Lucie Medicaid attorneys at Kulas & Crawford discuss how to choose a long-term care insurance policy.
Why Is Long-Term Care Planning Important?
Long-term care planning should be part of your estate plan because there is a high probability that you will need LTC and if you do need care, it will likely be expensive. When you enter your retirement years (at age 65) you will already stand at least a 50 percent chance of eventually needing some type of long-term care. The older you get, the greater the odds of needing LTC. Across the nation, the average cost of a year in LTC was around $90,000 for 2018. That same year, Port St. Lucie residents paid, on average, just over $105.000 for a year of LTC. With an average length of stay of three years, it becomes clear that an LTC bill could wreak havoc with your finances – and deplete your retirement nest egg. Why would you be responsible for paying your LTC expenses? Because Medicare won’t cover LTC costs and most basic health insurance policies also exclude expenses related to long-term care.
Is Long-Term Care Insurance the Solution?
Purchasing a long-term care insurance policy is certainly one way to plan ahead for the possibility that you will be faced with the need to pay for LTC. Long-term care insurance is a separate insurance policy that is limited to covering costs associated with LTC. Care must be taken when purchasing an LTC insurance policy because the coverage, exclusions, and terms can be complex and confusing. Furthermore, no two policies are exactly the same. To begin with, an LTC insurance policy may cover some, 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
Questions to Ask When Considering a Long-Term Care Insurance Policy
Most of us are not particularly good at reading the fine print in contracts, including contracts (policies) with our various insurance carriers. As a result, people are often surprised when claims are denied. Unlike your car insurance policy, however, you cannot simply switch to a new carrier every few years when you finally notice something you don’t like about the policy or when someone offers you a better rate. LTC insurance typically becomes more expensive the older you are, making it important to choose a policy when you are younger and stick with it if you decide LTC insurance is your best option. When considering an LTC policy, consider the answers to the following questions:
- How much will you pay over the lifetime of the policy? Even a seemingly reasonable premium will add up if you are paying that premium for 20, 30, or even 40 years before you actually use the coverage. Because there is no way to know if, or when, you will need the benefits offered by a policy, a good rule of thumb is to calculate the lifetime costs of paying until age 70, 80, and 90 to give you a rough idea what the aggregate cost will be compared to the benefits the policy offers.
- Is there is a mandatory waiting period? It is somewhat common for an LTC insurance policy to have a waiting period during which time the policy will not cover expenses. In 20 years, the average monthly cost of LTC in Port St. Lucie is estimated to be almost $16,000, meaning that a six month waiting period would cost you almost $100,000 ($96,000) out of pocket.
- Does the policy have an annual or lifetime maximum? Both are not uncommon. An annual maximum benefit will limit your options when choosing an LTC facility to those that are within your price range while a lifetime maximum might mean significant out of pocket expenses if your stay is lengthy.
- What exclusions apply? Most LTC policies, like other types of insurance, include exclusions that you should pay attention to when considering the policy. Some of the most common exclusions include:
- 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.
- Will the policy cover you outside of the U.S.? This is another common exclusion which can render the policy worthless if you are planning to move out of the country when you retire.
- Does the policy terminate at a specific age or after a specific number of years? Make sure there is not an arbitrary termination age which can also result in out of pocket expenses.
Is Medicaid Planning a Better Way to Go?
Paying for an LTC insurance policy can be prohibitive for many people, particularly if they wait until they are older and the premiums are high. What many people do not realize is that while Medicare won’t cover LTC expenses, Medicaid will. Medicaid eligibility can be problematic though if you failed to plan ahead. If you believe there is even the possibility that you will need to rely on Medicaid in the future, Medicaid planning is imperative.
Contact Port St. Lucie Medicaid Attorneys
For additional information, please join us for an upcoming FREE seminar. If you have specific questions about purchasing a long-term care insurance policy and/or about including Medicaid planning in your estate plan, please contact the experienced Port St. Lucie Medicaid attorneys at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.
