Hopefully, you have considered the possibility that you (or a spouse) will end up in long-term care. Although most of us prefer to envision living out our retirement years in our own homes, the reality is that long-term care could be necessary at some point which makes planning for how you will pay for that care an important part of your estate plan. The Coral Gables elder law attorneys at Stivers Law explain what you need to know about long-term care insurance.
How Does Long-Term Care Insurance Work?
The reason you might wish to consider purchasing long-term care insurance stems from the likelihood that you will need long-term care (LTC) and the high cost of that care. As a senior you will probably rely on Medicare to pay for most of your healthcare 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 some, long-term care insurance is an option.
Long-term care insurance is a separate 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. LTC insurance works the same way by only covering expenses that are related to long-term care.
If you are considering LTC insurance, however, you must pay close attention to what a policy does cover and what it doesn’t cover. An 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
What people often fail to pay attention to, however, are the limitations and exclusions that apply to an LTC 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 an LTC policy will start paying out benefits, meaning you must pay out of pocket in the meantime.
- Maximum benefits. Some policies have a yearly, per occurrence or lifetime maximum benefit.
- 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 canceled?
- 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.
Along with taking any exclusions or limitations into account, 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 make use of the benefits, or you may never need them. With that in mind, think about what you will pay if you pay premiums for decades.
Medicaid Planning Is Often the Better Option
Long-term care insurance isn’t the only option, nor is it usually the best option when it comes to planning or the high cost of long-term care. 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. 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 is imperative to ensure that your assets are protected and that you are eligible for Medicaid when the time comes that you need long-term care.
Contact Coral Gables Elder Law Attorneys
For more information, please join us for an upcoming FREE webinar. If you have additional questions or about elder law issues, contact the experienced Coral Gables elder law attorneys at Stivers Law by calling (305) 456-3255 to schedule an appointment.
Justin serves as a member of the American Academy of Estate Planning Attorneys (AAEPA), a national organization comprised of legal professionals concentrating on estate planning. As a member of the Academy, he receives ongoing, comprehensive training on modern estate planning techniques.
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