While most of us don’t want to be a financial burden to our kids, without an adequate investment portfolio or some type of Long Term Care Insurance, chances are… we will be. I know, we all say our kids would care for us in the event we couldn’t, but ignorance is sometimes bliss. Or wishful thinking. When round the clock care is needed it can become much more than our kids, or we, bargained for.
So… what is Long-Term Care Insurance? The phrase "long-term care" refers to the help that people with chronic illnesses, disabilities or other conditions need on a daily basis over an extended period of time. The type of help needed can range from assistance with simple activities (such as bathing, dressing and eating) to skilled care that's provided by nurses, therapists or other professionals.
Here are 10 things everyone should know:
- Employer-based health coverage will not pay for daily, extended care services. Medicare will cover a short stay in a nursing home, or a limited amount of at-home care, but only under very strict conditions. To help cover potential long-term care expenses, some people choose to buy long-term care insurance.
- Policies offer many different coverage options. Since you can't predict what your future long-term care needs will be, you may want to buy a policy with flexible options. Depending on the policy options you select, long-term care insurance can help you pay for the care you need, whether you are living at home or in an assisted living facility or nursing home. The insurance might also pay expenses for adult day care, care coordination and other services. Some policies will even help pay costs associated with modifying your home so you can keep living in it safely.
- Your age and health. Policies cost less if purchased when you're younger and in good health. If you're older or have a serious health condition, you may not be able to get coverage — and if you do, you may have to spend considerably more.
- The premiums. Will you be able to pay the policy's premiums - now and in the future - without breaking your budget? Premiums often increase over time, and your income may go down. If you find yourself unable to afford the premiums, you could lose all the money you've invested in a policy.
- Your income. If you have difficulty paying your bills now or are concerned about paying them in the years ahead, when you may have fewer assets, spending thousands of dollars a year for a long-term care policy might not make sense. If your income is low and you have few assets when you need care, you might quickly qualify for Medicaid (Medicaid pays for nursing home care; in most states, it will also cover a limited amount of at-home care). Unfortunately, in order to qualify for Medicaid you must first exhaust almost all your resources and meet Medicaid's other eligibility requirements.
- Your taxes. The benefits paid out through a long-term care policy are generally not taxed as income. Also, most policies sold today are "tax-qualified" by federal standards. This means if you itemize deductions and have medical costs in excess of 7.5 percent of your adjusted gross income you can deduct the value of the premiums from your federal income taxes. The amount of the federal deduction depends on your age. Many states also offer limited tax deductions or credits.
- Types of covered services. Policies may cover the following care arrangements: Nursing home, assisted living, adult day care, home care, home modification, care coordination with health care givers, Bed reservation in case you stay elsewhere for a short period of time.
- Depending on your age, it determines when you start the policy. Inflation protection can be a huge benefit. As years go by and costs go up, the daily benefit or payment should increase as well. 10 years down the road a $150 per day benefit won’t be enough to cover costs that have increased faster than inflation.
- Your savings and investments. A financial advisor - or a lawyer who specializes in elder law or estate planning - can advise you about ways to save for future long-term care expenses and the pros and cons of purchasing long-term care insurance.
- Many types of plans. There are individual plans, employer-sponsored plans, state partnership plans and joint plans for couples. Again, a financial advisor or professional can help you determine what type of plan is best for your situation.
Deciding if LTC Insurance is right for you can be overwhelming as you wade though the information. But a financial professional can help answer your questions and help you decide what is right for you and your situation. Call us, we’re here to help.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Ford Financial Group and LPL Financial do not provide legal/tax advice or services.