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Long-Term Care Insurance


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Long-Term Care Insurance Information

Long Term Care Insurance

Is it better to have insurance and not need it, or to need insurance and not have it?

Long term care is expensive & care giving impacts the lives of people we love.

Living a long life is a near certainty, planning for it is a necessity.

Most people would like to stay in their homes as long as possible.  However, with most private agencies requiring  4-hour minimums of care, and when care is necessary two or two times a day or in the middle of night, cost of home care can become very expensive.  Home care can also be isolating.  Assisted living settings and continuing care communities have become inviting alternatives.  Most people cannot afford this level of care or at least do not want to fully fund this care and derail their estate plan. 

Nursing homes have become places for the very sick and the poor, not a good financial mix. When needed, the wealthier population will often choose a private nursing home at much greater expense.

LTC insurance provides a way to fund or affordably co-fund the cost of LTC.  Equally important, LTC insurance provides a direction for the family; an intent to minimize burden by providing funding to hire caregivers or funding a facility rather than an expectation of family providing care to preserve the estate.   

Payment Sources for LTC:

          Medicare is the government’s skilled insurance program paying for doctors, nurses and therapists. Most LTC is unskilled; Medicare does NOT pay for custodial long term care.

          Medicaid is the government’s medical insurance for the poor. In order to qualify, you must spend down your assets to poverty levels and any income will be used to offset the cost of care over a minimal level.

Types of Policies

          Traditional/Stand-Alone: Typically provides the greatest return for premium paid. HSA’s and MSA’s may fund these products up to age based limits.  Tax benefits for the self-employed and business owners

          Hybrid:  A combination of life and long term care insurance that leverages the long term care benefit - Guaranteed Premium - Return of Premium (at whim or at death)

          Life Insurance with LTC Rider:   A life insurance product with a rider allowing a portion or all of the death benefit to be eligible for funding qualified long term care expenses. 

          Alternative Products: Life insurance with chronic care riders, annuities with LTC riders or home care contracts,provide options for those with more significant health issues but are still independent, at time of  application, in all aspects of their care.

Since there is no crystal ball…  The real question: is it better to have insurance and not need it, or to need insurance and not have it? 
 
If you had LTC insurance & did not need it:

           You would have lost the premium paid or the loss of interest on premium paid with a hybrid product.  However, in both cases, you would have had the peace of mind that had you needed it, your estate and family were protected.  In addition, depending on the policy chosen and state you live in, you may also have had lien protection of a primary home in MA or the value of your long term care benefit protecting again Medicaid Lien with partnership.

 
If you needed LTC insurance & did not have it: 

Problems might include:

Making decisions of which funds to liquidate during crisis

Conflict between siblings regarding responsibilities and finances

Decline in lifestyle and health for the care giving spouse

Stress on children as care giving impacts their employment and relationships.

Inability to afford optimal caregiving or care setting

Losing the home to Medicaid repayment

Inability to leave an inheritance

Regret that this could have been covered with a LTC policy

LTC Insurance provides additional catastrophic financial protection

 

Massachusetts:  Medicaid may put a lien on your house for the amount it spends on your long term care expenses.

A LTC policy may provide more than $870,000 of Medicaid lien recovery of your MA home.

 

In at least 40 other states:  Partnership provides protection from Medicaid spend-down up to the total benefit of the qualified long term care policy.

Tax qualified policies may be eligible for tax deductions

Individuals may use their HSA’s or MSA’s to fund long term care premiums, up to age based limits. 

Self-Employed, Partnerships, S-Corps may take age based premium deductions.

Corporations may take full deductions for premiums paid for employees without a taxable event to the employee.

Regardless of whether the premiums are taken as a tax-deduction by the employee or the employer, benefits are received tax free.

 

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