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Long term care (LTC) insurance
helps people who will need to eventually live in a nursing home, or have any type
of assisted living, or have any type of home health care, or need to be cared
for in an adult day care center. These types of long term care can be very expensive
and can deplete hard earned retirement dollars and or even entire estates. A nursing
home for instance can cost anywhere from $36,000 to $60,000 per year and the cost
continues to go up. Combine the ever increasing cost of LTC with the fact that
people are living so much longer today and you begin to see why planning for long
term care has become such an important part of any good financial plan.
There are many different
surveys and studies that attempt to predict how many people will need long term
care at some point in their lives. The best ones we have seen suggest that approximately
60% of all Americans will need some type of LTC during their lifetime. In addition,
these studies also show that the average stay in a LTC facility is 3 years. LTC
is not covered by Medicare nor is it covered by Medicare supplement policies.
The vast majority of group plans do not cover LTC, and Medicaid provides LTC assistance
only after you "spend-down" your non-exempt assets to the poverty level.
With such a great
risk, doesn't everyone need LTC insurance? After all, you have to do your own
financial analysis in order to decide whether it's feasible to buy LTC insurance
or not. The truth is, you may or may not need to buy insurance. It comes down
to the various income and asset resources you have available to you. To illustrate
this, let's take a look at the varying needs of 3 general groups that are low
resources, high resources, and medium resources groups. Low
Resources Group: This group has countable assets that are at or below the spend-down
limits imposed by the state Medicaid rules. Additionally, this group typically
has a monthly income below the average nursing home costs for the state where
they live. In many cases, people that fall within this group will qualify for
Medicaid without having to spend down their assets. Countable
assets include such things as cash, stocks, bonds, mutual funds, cash value insurance
policies, CDs, boats, jewelry, and real estate investments. In most states, you
will only qualify for Medicaid if you have no more than $2,000 in countable assets.
Spouses of a nursing home resident who still lives in the family home are allowed
to retain countable assets of $19,020 to $95,100, depending on the Medicaid rules
in their state. The Medicaid rules will allow the live-at-home spouse (also referred
to as the "community spouse") to retain the family residence, a vehicle,
and a modest amount of other assets for their support. The Medicaid rules also
establish a monthly support allowance to help community spouses meet their living
needs, and this allowance usually falls between $1,461 and $2,378 per month depending
on state law. This means that if the community spouse's income falls below the
allowance, the state will then allow the community spouse to keep an amount equal
to the difference from the resident spouse's income. On the other hand, a community
spouse is usually not allowed to retain any income from the resident spouse if
their income exceeds the allowance. In
some cases, even this group might want to consider LTC insurance if the monthly
allowance is below the community spouse's living needs. The United Senior's Health
Cooperative Recommends the following guidelines for LTC insurance applicants:
(1) no more than 7% of income should go toward premium, (2) retirement income
should be at least $35,000, and (3) applicant should have assets of at least $75,000,
excluding the home and an automobile. High
Resources Group: This group has sufficient monthly income to support the community
spouse's living needs and to cover the monthly nursing home costs in their area.
Alternatively, this group may have enough countable assets set aside to meet a
3-5 year nursing home stay ($200,000 to $350,000 per spouse, depending on nursing
home costs in their community.) Many of these people, still do, however, obtain
insurance because it can help them protect their estate from being reduced by
a long-term care need. Most importantly, it can give them some added assurance
by providing a separate source of funds to be used for long-term care needs. Medium
Resources Group: This is the group that often needs the insurance the most. This
group of people has countable assets that exceed the Medicaid limits, but they
don't make enough money to cover the monthly costs of nursing home care in their
area. Another thing that separates this group from those with high resources is
that they lack a separate source of assets to cover an extended stay in a nursing
home. For this group, having to come up with $6,000 per month over a long-term
period could potentially deplete their estate or create an economic hardship for
the community spouse. If you are in this group, you should consider long-term
care insurance. This insurance could help secure your financial independence.
It can also help to preserve cherished assets for spouses and younger family members.
The reasons people
purchase LTC insurance include following:
1. LTC expenses and burdens can
be a financial and emotional drain. Because of this reason, many children have
offered to assist mom and dad with the premiums for LTC.
2. The burden of
not having LTC coverage may result in guilt from children or spouses who end up
being care takers because the cost is too high.
3. LTC coverage can provide
peace of mind. Having an LTC policy can put your mind at ease that you likely
won't have to spend-down your assets.
4. Since the vast majority of wealth
passes from one generation to the other; from father to son or daughter, for example,
many people that have an estate (own their home, have savings and retirement funds,
etc.), don't mind spending their income, but do want the vast majority of what
they have accumulated to go to their family, not the government.
5. Most people
who have purchased LTC coverage did so because they do not want to be a burden
to their spouse, family, or friends, and they want to live an independent life,
not having to turn to the government for assistance.
6. Most importantly,
many feel the quality of care under Medicaid is not as good as private pay, and
that welfare is only for the needy, not for people trying to hide their assets
to qualify. Long
Term Care Insurance is an increasingly important part of a good financial plan.
Talk to your financial planner and request quotes from several different insurance
companies along with the important information such as: the insurance company's
history of rate raising, their financial soundness, and the specific features
and exclusions for their LTC policies. For
a free consultation and estimation, call me at 310-800-6333. 
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