Long-Term Care Insurance

It is common today to see advertisements of senior couples in the golden years of their retirement happily enjoying their time together without any worries or stress.  The reality, however, is that our retirement years may not go exactly as we have planned, especially if we face an unforeseen health crises.  In order to prepare for retirement going differently than hoped, it is important for seniors to have a plan in place that includes a viable pathway for your substantial downside risks.  In addition to having the best legal documents in place for eldercare, investing in long term care insurance now can save you money over time, protecting your life savings and giving you options and choices that would not be available to you otherwise.

If you make it to the age of 65, your risk of requiring long-term care during your lifetime is over 50%; for women it is over 60%.  Most people have not planned financially for the cost of long-term care because it is difficult to do.  Long-term care insurance is important for anyone who wants to have their needs satisfied at home or worst case in an assisted living facility, as no one dreams of spending their final years in a nursing home facility.   First, it is important to know that Medicare and/or your Health Insurance do not cover you for your long term care needs and Obamacare does not change that fact.   Second, most people, even those who are financially destitute, cannot qualify for public assistance for long term care in their homes or in assisted living facilities.   One must have very low income—lower than most peoples’ social security check—to qualify for home care or assisted living care.

Most people, even well to do families with professional help, can qualify for Medicaid for institutional care in a nursing facility, but that is the dreaded place we must be forced to suffer.    Nursing care is institutional care for the most serious of cases, such as those who are bed ridden, those who are very sick, or those who need medical care in addition to attention to their activities of daily living. This is a much higher level of care than assisted living facilities, also called domiciliary care or custodial care. Rest homes fall into this lower level of care, where people need assistance getting dressed, taking medicines, or getting into the shower.

Unfortunately, most of us will be unable to qualify for public assistance unless we require a nursing home.   The only exception is through the VA for war period veterans, and the spouses and widows of war period veterans, or folks who have very low incomes and otherwise meet the means tested requirement for the North Carolina Special Assistance program.

Hence, everyone other than those wealthy families who can self-insure and withstand a loss of $300,000 to $400,000 without an adverse impact on the family, should acquire as much long term care insurance as one can afford.  Long-term care insurance requires careful planning.  It is important to think about getting it early on, or you may become uninsurable and not be eligible to purchase it at all.  The earlier you get long-term care insurance, the cheaper it will be for you—initially and over time.  Also, the earlier you apply for long-term care insurance, the less likely you are to have suffered life-altering health issues, such as a heart attack or a cancer scare. The older we become, the more health issues we face, which will cause us to receive less favorable insurance ratings, and that results in higher premiums.

In addition, long-term care insurance can be complicated. Choosing your policy is not like choosing a regular auto insurance policy or homeowner’s insurance policy in North Carolina, as these contracts are highly regulated and will be the same from one company to the other.  These companies compete on price and service—not the terms of the contract.  For long term care insurance, however, every policy looks different.  Each company underwrites their policies uniquely and each company pays differently using their own definitions and terms under their contract.  Underwriting guidelines are important because one company may insure you while another company will not offer you a contract.  Group policies typically will have different coverage than individual policies, even at the same company.  Sometimes people will be able to get a less expensive policy individually even if a group policy is available to them.  Group policies will be based on the average of the group, so if you’re younger and/or healthier than the average of the group, than you will be better off with an individual policy.  It all depends on what coverage you need or desire and what each company is willing to provide for you as an individual.  Be sure to compare these policies carefully.

In addition to your policy, purchasing an inflation rider will provide an increase in coverage to offset the projected rising costs of long-term care. Today, the cost of standard long-term care in Raleigh is approximately $6,500. This is continually rising and will likely increase drastically in the next 15 years.  A 5% compound is the best inflation rider that you can purchase to offset these projected costs, but there are others that help and are less expensive.   Be aware that if you purchase an inflation rider (and you should), your insurance premium will increase over time as a result.

Finally, there are several different options for purchasing long-term care insurance, depending on your particular needs. There are also different kinds of policies and payment plans that can make a significant difference to a purchaser.  There are traditional policies and asset based policies and other types of plans that can work for you.  For example, while you’re working, you can buy a policy with premiums that you can pay off before you retire, so that you have no long term care insurance premium to pay upon retirement when your income decreases.  In contrast, another type of long-term care insurance is called asset-based long-term care; you can purchase a life-insurance product with a long-term care rider, so it pays out as a long term care benefit or as a death benefit, or both.  If you have a life insurance policy with cash value (generally a whole life policy that you’ve been paying on 15-20 years), and if you are still healthy and insurable, then often you can exchange it for a better life insurance policy that will give you a long-term care benefit that’s exactly what you need. The nice thing about this type of insurance is that you don’t have to worry about whether you will get your investment back.  It will either be returned as a tax-free long-term care reimbursement, or it will be life insurance paid out as a significant tax-free benefit to your family at your death.

Long-term care insurance can be confusing, but it is an important tool to give you options and choices if your golden years are not so golden.   Contact an experienced Elder Law attorney to help you understand long-term care insurance and whether it is right for you.  Don’t wait too long to look into the numerous long-term care insurance products available out there that can be uniquely tailored to you and your family. Call W.G. Alexander & Associates today!

Attorney Bill Alexander discussed these issues and more this past Tuesday on W.G. Alexander & Associates’ radio program, “Asset Protection Today,” on TalkRadio 850 WPTK (AM). Be sure to listen every Tuesday morning from 9:00-10:00 AM.  To listen to this week’s show, please visit WPTF’s on demand show blog by clicking here.