Do you or a loved one have a Long-Term Care Insurance (LTCI) policy, or are considering purchasing one? Well, if you have an insomnia problem, reading any insurance policy will solve it in very short order. Then how can you tell if yours is worthwhile or, more importantly, will meet your needs?
First and foremost, LTCI is designed like all insurance, to protect you against a financial hardship caused by a loss. LTCI is protecting you from the future costs of long-term care in exchange for your premium payments until that need or loss occurs. This coverage will help preserve your accumulated assets and often afford you a wider range of long-term care options. But it comes at a cost and to some it can be prohibitively expensive. When making a decision to get LTCI you should consider now and for many years to come your ability to afford the premiums.
Of course, in evaluating an existing or new policy, basic questions can affect coverage and also cost. It is wise to not get hung up on only having the absolute best coverage when good is tremendously better than NO coverage at all.
There are no two people or financial situations exactly alike, but you must start somewhere. Let’s first start with a few care questions you should consider before evaluating a LTCI policy:
- Who will or is likely to care for me when I need it?
- How will I cover care costs when I need it?
- Will I be able to stay in my home when I need care?
- In my area, what are typical care costs (low & high)?
As you can see, there are many variables which you and your loved ones should explore while you can. The more questions you ask now, the better prepared you will be for the future.
What questions should be asked for any LTCI policy?
Again, there are endless options available, so we will focus on those most common to all policies. We do need to remember the policy’s cost (old or new) is primarily determined by the age of the insured, but the options you choose also affect your costs.
Here are some items to review in each policy to help you out:
- What is the daily benefit amount? This amount often ranges from $50 to $350 per day for covering care costs, typically it is $150 or $200 per day
- How long will the benefits be paid? This can range from 2-6 years or up to a lifetime, typically it is 3-5 years.
- What is the elimination period? This is the number of days you will have to pay for care “out of pocket”, before the LTCI policy starts paying for care. Think of it like a deductible, except it ranges from 0 to 360 days, generally it is 90 days.
- What kinds of care will the policy cover? This can be as restrictive as only skilled nursing homes or include assisted living facilities, home care, adult day care center and even at home non-skilled care.
- Does the policy have inflation protection? A policy with this feature will increase your benefit amount by some percentage to hopefully keep up with the rising care costs. Most are 3% or 5% compounding on the benefit amount.
These are not all the options available, but they can be found on most policies in some form or fashion. What is key to know is that you can adjust any or all of these features to build a policy that helps meet your care needs while working to make it affordable now — and in the future. At the same time remember, if you have a current policy and the premiums are being raised you can look at changing some of these features to make it more affordable and still provide care coverage you can live with.
You are not an expert just yet, but you are far ahead of most by taking the time to learn and plan for you or your loved ones long-term care needs. Continue on your educational journey by attending seminars at Iona Senior Services, visiting your local library or Area Agency on Aging in your community, or come back here each month for more articles related to financial planning for long-term care needs.
by Rick Gow, CSA
Certified Senior Advisor & Wealth Management Advisor
with Lara, May & Associates, LLC. Member FINRA/SIPC
Rick Gow is a seasoned Wealth Management Advisor, a member of the Society of Certified Senior Advisors®, facilitator of the Meaningful Future Process™ and nationally recognized speaker on many senior related long term care financial planning topics. He primarily works with seniors, their caregivers and family members, related to all aspects of financial planning for long term care needs. He helps develop all-encompassing long term care plans, tax efficient wealth transfer structures and retirement strategies. Most plans start with his Long Term Care Financial Assessment that addresses various components: from income generation, Medicaid & Veteran’s Administration compliant insurance products to real estate transfer strategies and principal protection, just to name a few.