Long term care insurance is not the right financial planning strategy for everyone. However, for many people, long term care insurance is the only way to ensure continued quality of life for them or their family as they age. The following is a list of the top 5 reasons to purchase long term care insurance:1. To ensure you have the quality of care and living standards you want.
2. To secure coverage before you have health conditions that cause your application to be declined.
3. To ease the burden on your spouse, partner, children or friends to care for you and allow you to maintain your independence.4. To ensure you can afford the expense of long term care for both you and your spouse or partner.5. To preserve your estate so you can leave inheritances to your heirs or engage in charitable giving.To determine whether purchasing long term care insurance is a prudent choice for you, a good starting point is to examine your accumulated assets and how much you have saved for retirement, health care expenses, and other costs. If you have a very high net worth and have substantial assets that can be used to pay for nursing home care and related expenses, you may choose to self insure rather than buy a LTC policy. If you have few assets, have very little in savings and investments, and will be able to meet the requirements to qualify for Medicaid, purchasing a long term care insurance policy may only make your financial situation worse.If you fall in between these two categories and do not have millions in assets but have too much money to qualify for Medicaid, you may want to buy a LTC insurance policy. For individuals in this middle category, long term care insurance may be necessary to cover expenses associated with your nursing home care and related types of services. Ask a
financial planner to review your financial situation and advise on whether a LTC insurance policy is something you should incorporate into your financial plan.
Before You Buy Long Term Care Insurance
Before making a decision to buy long term care insurance, read The Consumers' Guide To Long Term Care Insurance by Stephen F. Rowley. It explains the terminology used in long term care insurance contracts, compares the different options available on such policies, and discusses common limitations and exclusions. This book also outlines the pros and cons of each type of policy so you can make an informed decision.The Consumers' Guide to Long Term Care Insurance is a very affordable way to get additional information before buying long term care insurance, especially considering the cost of a typical policy. It features a worksheet designed to help with the process of buying long term care insurance. Information on how underwriting and claims are handled is also included.For more tips on how to decide whether to buy long term care insurance, review our section on Long Term Care Books.
List of Questions to Ask an Insurance Agent Before Buying Long Term Care Insurance
1. Can the policy be cancelled, terminated or non-renewed if I decline in health or reach a certain age? 2. Does the policy cover Alzheimerís disease? What is excluded? 3. Does the policy provide inflation protection? 4. What is the daily, weekly or monthly rate or amount that will be paid to me or a provider of care? 5. How long has the company been licensed in my state to issue long-term care insurance? Is the insurance company financially viable? 6. What is the maximum lifetime benefit or total benefit amount under the policy? Is there a limit to the number of years of coverage under the policy? 7. Will this policy pay for a family member or friend to provide care to me in my home? If so, how much per day will it pay? 8. How often do I have to pay the premium and in what amounts? How long do I have to be receiving care before future premium payments are waived? 9. Can the premium amount increase? If so, what limitations or restrictions are there on the amount the premium can be increased? 10. What conditions do I need to meet for benefits to be paid under the policy? 11. Will the policy pay any death benefits to my spouse, children or other heirs? 12. What benefits will be available to me under the policy if I stop paying premiums after five years, ten years, etc.?
If You Cannot Afford LTC Insurance
Long term care insurance is a great benefit to those who can afford it. It can provide peace of mind and a sense of financial security as part of your overall financial plan. However, for some it may not be feasible to purchase long term care insurance. It is important to recognize this rather than committing to a policy you canít afford to maintain.An insurance agent may give you a hard sell in an attempt to scare you into buying long term care insurance. Of course, there are valid reasons to be very concerned about how you will pay for nursing home care or assistance with daily living as you age. But if the cost of a long term care policy will jeopardize your ability to pay your bills or reduce your current living standards substantially, the price you pay for long term care insurance may be too high.If this is your situation, explore other alternatives. Research whether you may qualify for Medicaid or Veterans Affairs benefits to pay for a portion of your long-term care. Talk with family, friends, and trusted advisors. Take time to do more research and only make a decision about long term care insurance after weighing all your options.
What Does Long Term Care Insurance Cover?
The types of care covered by a long term care policy vary widely by policy and insurer. Some long term care policies pay for adult day care, in-home health care such as physical therapy and skilled nursing care, hospice care, respite care, nursing home care, and assisted living care.Some long term care policies pay a daily, weekly or monthly amount to the provider of care or reimburse you for expenses actually incurred. Other types of policies pay you a fixed amount if you meet certain criteria, regardless of the expenses you actually incur. When you buy a long term care policy, you will choose a benefit amount. Before choosing a benefit amount, research the costs per day, week or month for different types of care from home health agencies, adult day care centers, assisted living facilities, and nursing homes in your area. If you want a family member to care for you in your home, discuss with that person the amount they will need to be paid and find an insurance policy which features that benefit.Long term care policies also have maximum lifetime limits or total plan benefit amounts. These limits can be stated in years, such as one, two, three or more years of coverage. They can also be stated in dollar amounts, such as $1 million. After you exceed these maximum or total benefit amounts, you will no longer be paid any benefits under the policy.
It is extremely difficult to predict the length of time you will need care or how much it will cost. You can review studies and reports that provide information such as the average stay in nursing homes and average costs by state. Examine your own health and your family history when considering the amount of benefits you need to purchase.Many people fail to buy long term care insurance because they insist they will never go into a nursing home. It is a common misconception that long term care insurance only pays for nursing homes. However, many policies pay for several other types of care, including having someone care for you in your own home. If you want to maintain your independence, long term care insurance can be an important part of your financial plan. To learn about key provisions in your long term care insurance policy, see LTC Policy Fine Print.
When You Should Not Buy LTC Insurance
The decision about whether you should purchase a long-term care insurance policy should always be made after receiving guidance from your financial advisor. However, in general, you may want to avoid buying long term care insurance if:1. Paying a long term care insurance premium will cause you to go without other essentials such as food, housing, transportation, health insurance or providing for your dependents.2. You donít have a steady income and may be unable to make the premium payments on a continuous basis, causing you to let the policy lapse and forfeit the premiums already paid without receiving any benefits.3. You are single or widowed, have no children or heirs, and have a small estate and low income, such that you may be eligible for Medicaid. See Medicaid planning.4. You have a large estate, possess adequate savings to pay all estimated long term care expenses, do not wish to leave inheritances to a spouse, partner, children or other heirs, and are not concerned about keeping assets available for charitable giving.Whether it is right for you to buy long-term care insurance depends on your unique circumstances. Only a financial planner that has reviewed your financial situation and estate planning goals can properly advise you on this type of decision.
Alternatives to Long Term Care Insurance
For many people, the ideal scenario is to own a long term care policy that will cover the lifestyle and type of benefits you want if you require custodial care, skilled nursing home care or assistance with daily living. Nevertheless, if long term care insurance is not an option, there are alternatives.There are drawbacks and disadvantages to every alternative to long term care insurance. Before relying on any of these options in lieu of purchasing a policy, do your research and talk to a financial planner.Alternatives to buying long term care insurance include the following:1. Long term care annuities2. Reverse mortgages3. Accelerated death benefits from a life insurance policy4. Continuing care retirement communities, called CCRCs5. Charitable remainder trusts and 6. Saving for long term care on your own.This article was updated on May 9, 2019.
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