Long-Term Care Policies Offer Options
John Morvay is the owner of Morvay Insurance Group in Canfield. He serves on the board of directors of the Western Reserve Association of Health Underwriters.
Long-term care refers to the help people with chronic illnesses, disabilities or other conditions need on a daily basis over an extended period of time. The type of help can range from assistance with simple activities to skilled care that is provided by nurses, therapists or other professionals.
Traditional health coverage insurance will not pay for daily extended care services. Medicare only will cover a short stay in a nursing home or a limited amount of at-home care. Medicaid will cover the costs of long-term care. But in order to qualify, you must “spend down” your assets to become eligible. Your measurable resources must also be under the amount allowed in your state. If you intend to transfer assets to another family member, the government imposes a five-year look-back rule.
The problem is that long-term care is very expensive.
Assisted living facilities help residents as needed with activities of daily living such as bathing, eating, dressing and using the toilet. They generally do not provide medical care, but they do offer residents socialization, transportation, meals and housekeeping. In 2017, a stay in an assisted living facility cost on average $3,750 per month – $45,000 annually.
Skilled nursing care is much more extensive. Services include room and board, medical management, therapies, rehabilitation and 24/7 nursing care. In 2017, costs averaged $8,121 per month; $97,455 a year. These costs can quickly wipe out a lifetime of savings.
Since you cannot predict what your long-term care needs will be, you may want to buy an insurance policy with flexible options.
Depending on the options you select, long-term care insurance can help pay for the care you need, whether 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.
Another solution is asset-based long-term care. Generally, it is provided with a base of life insurance or an annuity. (Underwriting is simpler because asset-based long-term care is usually easier to meet eligibility.)
With asset-based long-term care policies, there can be provisions that allow beneficiaries to collect the death benefit or receive the principal back if the care benefit is not used. If the plan is annuity-based, you can receive the interest and tax advantages of an annuity, but the flexibility of using the funds for long-term care. While most of these hybrid products are not as comprehensive as traditional long-term care insurance, they can be a great alternative depending on the goals and personal situation of the individual.
Other solutions may include linked policies, tax-free benefits, group plans, deductibility of premiums, and state long-term care partnership programs. A professionally trained insurance agent can provide you with alternatives to solve your long-term care needs and make the solution affordable.
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