Many people don’t realize that purchasing long-term care insurance is one of the best investments to protect themselves for the future, as the likelihood of facing a long-term care crisis is high, and most families cannot afford to self-insure. Unfortunately, long-term care insurance often isn’t on people’s radar until a long-term care crisis happens to them or someone that they love. People should buy long term care insurance when they are healthy and in their forties or early fifties—exactly when other financial needs are tugging on them. But it is too expensive for many who wait until their late fifties or early sixties. Hence it is important to buy long term care insurance and keep it as soon as you possibly can.
The first thing that most people should know about long-term care insurance is that their traditional health care insurance doesn’t cover assistance in the home, assisted living, or nursing facility long-term care. Likewise, the Affordable Care Act does not cover long-term care. You are responsible for these costs on your own. Unfortunately, with the exception of war period veterans, their spouses, and widows, there are many people who won’t be able to get government assistance for their long term-care needs.
However, your health care insurance and Medicare will cover some of your stay in a rehab facility after you are admitted to the hospital for three days. However, it is important that the hospital actually admits you during your stay (as opposed to keeping you on “observation” status). This is an important distinction, as Medicare will not pay for your rehab stay after you are transferred from the hospital unless the hospital actually admits you for a total of three days. For this reason, “admitted” status is an important distinction if you need to stay over night at the hospital (for reasons other than going for a brief emergency room visit).
Insurance is designed to shift risk from you to an insurance company. If the risk is fairly significant, then having insurance will be very helpful. For a married couple that reaches age 65 in good health, there’s a 75% or greater chance that one of the two will have a long-term care crisis (three years in a nursing home). Those who have dealt with a long-term care crisis know that it reduce your nest-egg by $200,000-$400,000. Most people can’t afford to pay those kinds of costs out of their retirement savings. Almost everyone needs long-term care insurance with the exception of those who are very wealthy (where spending $300,000 or more on long-term care would not affect their lifestyle).
Unlike the Affordable Care Act, which can’t exclude anyone because of preexisting health conditions, long-term care insurance companies can exclude those people who have had health issues in the past. If you have had a heart attack, diabetes, cancer, etc., you may not be able to get long term-care insurance, or it may be even more expensive. As people age, they face the risk of these problems increasing. The longer that you wait to purchase long-term care insurance, the greater the probability you will suffer a health issue that will make you uninsurable so that you can’t get long-term care insurance at any cost.
Unfortunately, most people wait until their late 50s to seek long-term care insurance, and then their premiums may be too expensive. Someone at age 60, a non-smoker in good health, can expect to pay $4,000-$5,000 a year in premiums. However, if you buy long-term care insurance in your 30s or 40s, this insurance is much more affordable. People at that age should seriously consider long-term care insurance, as if you have it and then have a crisis, this could be the best investment you’ve ever made.
Finally, if you’re going to invest, make sure to do your homework, as unlike homeowner’s or auto insurance, long-term care policies differ from company to company. Each policy is different with various distinctions from one policy to the next. It’s important to get good advice from someone who understands long-term care insurance in order to purchase it effectively. If you work for a large company with a group plan available, you should consider it. But you should know that group plans are not always better than individual plans. If you’re older and not as healthy as the average of the group, then it might be the best deal for you. But if you’re younger than the average member of the group who buys the plan, then you may not be getting the best deal. For this reason, group plans may or may not be cheaper for you depending on your situation. Lastly, it’s important to compare the strength of different long-term care insurance companies before purchasing. It might be 25 years from now when you actually need the coverage. For this reason, it’s important to find a reputable company that is sure to last.
For more information, visit the North Carolina Department of Insurance at http://www.ncdoi.com/shiip/. If you or your loved have questions about long-term care insurance, or would like to know more about government assistance programs such as Medicaid, Veteran’s Benefits, or other Special Needs programs, consider W.G. Alexander & Associates – we offer a unique blend of asset protection, Elder Law and estate planning. You can also attend our free seminars, learn more through our website at www.wgalaw.com, or call us at (919) 256-7000.
Attorney Bill Alexander discusses these issues and more every Tuesday morning on W.G. Alexander & Associates’ radio program, “Asset Protection Today,” on TalkRadio 850 WPTK (AM). Be sure to listen from 9:00-10:00 AM. To listen to last week’s show, please visit WPTF’s on demand show blog by clicking here.