Ensuring that your estate assets are distributed according to your wishes after you are gone may be your primary motivation for creating an estate plan; however, that same plan can – and should – include additional, related, goals. Planning for the very real possibility that you (or a spouse) will need long-term care, for example, may be something you want to include in your estate plan. In fact, failing to plan ahead for the high cost of long-term care could put your retirement nest egg at risk. One way to do that is to purchase a LTC insurance policy. A Vero Beach Medicaid planning attorney at Kulas Law Group helps you decide if long-term care insurance is worth the cost though.
Why Is Long-Term Care Planning Necessary?
When you enter your retirement years, you will already stand better than a 50 percent chance of eventually needing some type of long-term care. Each year thereafter those odds increase. If you are married, your spouse shares the same odds of needing LTC, thereby increasing the likelihood that you will incur LTC expenses at some point. Nationwide the average cost of a year in LTC was around $90,000 for 2018. In Florida, the average cost of LTC was about the same as the national average that same year.
Once you reach retirement age, you will probably rely on Medicare to pay for most of your health care expenses; however, Medicare will not cover expenses related to LTC. If you retain private health insurance, the odds are very high that it will also exclude expenses related to LTC. For the average person, paying out of pocket for years of LTC expenses is not a viable option which is where buying LTC insurance becomes an option. The question, however, is whether purchasing a long-term care insurance policy is worth the cost.
How Does Long-Term Care Insurance Work?
Because almost all basic health insurance policies exclude LTC expenses, insurance companies often offer the option to purchase a separate, or add-on, long-term care insurance policy that is limited to covering costs associated with LTC. It works in much the same way as flood insurance works for your home. Because most homeowner’s insurance policies don’t cover flood damage, insurance companies offer homeowners the option to purchase a separate flood insurance policy that only covers losses that are the result of flood damage.
The Real Cost of LTC Insurance
To really get a handle on what a long-term care policy will cost you, there are several things you must consider. First, you must pay close attention to what the policy does cover and what it doesn’t cover. A LTC insurance policy may, for example, pay for 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
Next, you need to understand the limitations and exclusions that apply to a LTC policy because those have a direct impact on the overall value and cost of the policy. Because every policy is different, you must read each policy to see if any of these limitations and/or exclusions apply. Common things to look for include:
- Waiting period. The applicable waiting period length can vary but you could have to wait months before a LTC policy will start paying out benefits, meaning you must pay out of pocket in the meantime. At about $9,000 a month, paying for LTC out of pocket for just six months in Florida could cost you over $50,000.
- Maximum benefits. Some policies have a yearly, per occurrence, or lifetime maximum benefit. A $1 million maximum benefit may sound more than sufficient – until you realize that in 20 years the average cost of a year in LTC in Florida is project to cost around $200,000, meaning you could exceed the policy coverage in about five years.
- Automatic termination. Does the policy terminate at a specific age or after a specific number of years?
- Cancellation policies. If you miss a single payment, will the policy cancel? What type of grace period do you have and can you reinstate the policy with the same premiums if it is cancelled? If not, you could pay a small fortune in premiums over the years only to lose the coverage when you actually need it.
- Coverage out of state or abroad. Many retirees move out of the state, or country, which could make your policy worthless if it won’t provide coverage.
Finally, you must consider the lifetime cost of the policy. Premiums increase the older you are when you take out a policy, making it wise to take out the policy when you are young and healthy right? The problem with that is that you could be paying those premiums for decades before you see any benefits – if you use the policy at all! Take the time to calculate what you will be paying if you pay the premium for 20, 30, even 40 years.
Is Medicaid Planning a Better Option?
What many people do not realize is that while Medicare won’t cover LTC expenses, Medicaid will. If you believe there is even the possibility that you will need to rely on Medicaid in the future, including a Medicaid planning component in your estate plan utilizes legal tools and strategies to ensure your assets are protected and that you are eligible for Medicaid if the time comes that you need long-term care in the future.
Contact a Vero Beach Medicaid Planning Attorney
To learn more, please join us for an upcoming FREE seminar. If you have additional questions or concerns about long-term care insurance or Medicaid planning, please contact an experienced Vero Beach Medicaid planning attorney at Kulas Law Group by calling (772) 398-0720 to discuss your legal options.