Many of my clients come in with questions about long term care insurance. It’s a popular planning tool recommended by many financial planners and estate planning attorneys to help offset the always rising costs of Nursing Home and other necessary care.
Allow me to take you through the analysis given to my clients and perhaps it will help you determine whether long term care is a good option for you.
What is Long Term Care Insurance?
Long Term Care Insurance is a specific kind of insurance specifically tailored to cover custodial care costs. It can be purchased to cover custodial care costs at home and/or in a nursing home. This is important and it bears clarifying. Whether you need to be placed into a nursing home or are eligible to receive care in your own home, long term insurance can protect you from being responsible for the costs of care received.
I currently receive Medicare. Won’t that cover my medical costs if I need to receive nursing home and/or in home care? What if I have purchased or plan to purchase a private MediGap supplemental policy?
Such insurance may cover custodial care in a nursing or rehabilitation facility for a maximum of 100 days following a hospitalization of at least 3 days duration, provided that the your treating physician has created a plan of care including a rehabilitative component AND it can be shown that the patient will receive a benefit from such rehabilitation. The first 20 days of such care will be fully paid for by Medicare. The remaining 80 days of such care are typically subject to a daily co-insurance payment of up to $157.50 (in 2015) per day. SOME Medigap insurance policies will cover this daily co-insurance payment, but if you currently have a Medigap policy or are looking to purchase one please ask your insurance sales representative to clarify the availability of such coverage on your policy.
What Types of Long-Term Care Insurance are Available?
There are two general types of Long-Term Care Insurance in New York State: insurance sold under the New York State Partnership for Long-Term Care and traditional, non-Partnership insurance.
What is New York State Partnership for Long-Term Care?
New York State Partnership for Long-Term Care is a unique program combining private long-term care insurance and Medicaid Extended Coverage. Its purpose is to help New Yorkers financially prepare for the possibility of needing nursing home care, home care or assisted living services someday. The program allows New Yorkers to protect some or all of their assets (depending on the insurance plan purchased), if their long-term care needs extend beyond the period covered by their private insurance policy.
How do I participate in Partnership insurance?
In order to participate in the Partnership you will have to purchase a policy from a participating Partnership insurance companies. You can view a list of such participating brokers by visiting http://www.planaheadny.com/insurers.htm
How does the Partnership work?
First you purchase a Partnership policy from one of the participating insurance companies. Second, you use the policy benefits. If you need Long-Term Care after policy coverage is exhausted, you are now eligible for coverage under New York State Medicaid without having to spend down your assets. The amount of Medicaid asset protection depends on the type of Partnership insurance you purchase. You can choose a policy that offers total asset protection or a policy which offers asset protection up to a defined dollar amount.
Who can I speak to about getting long term care insurance?
Obtaining long term care insurance is best done in the context of setting up a complete estate/elder law plan. While we do NOT at Lenza Law Firm sell any kind of insurance products, you can always reach out to us to speak about their usefulness and provide you with great referrals to trusted professionals who can help you with your needs. There are some important things to consider when speaking to an insurance broker about obtaining long term care insurance. Some of those things are as follows:
1) Cost – Be sure that your premium payments remain fairly consistent throughout the course of the policy. Also ensure that you understand any applicable waiting period and deductible issues
2) Length and amount of coverage – 3 years, 5 years or lifetime,
3) Type of coverage. Is the policy an actual costs coverage policy or an indemnity policy in which a fixed sum is paid regardless of costs once coverage is triggered,
4) Cover both at-home and nursing home care,
5) Require as few activities of daily living as possible in order to trigger coverage,
6) No prior hospitalization should be required,
7) Days spent in hospital awaiting placement should be covered,
8) Guaranteed renewability of policy, and limitations on premium increases,
9) Waiver of premiums during period of claim,
10) Flexibility in applying benefits so that insured may choose among a nursing home, assisted living, adult day care center, or care at home,
12) Stability of Insurance Company, i.e., that it has been in the long term care industry for a long time with a good claims payment history (rated
A+ by Best insurance rating service or others), and
Like any insurance product, each individual will need to make a cost/benefit analysis and then weigh the result of this analysis against the acceptable level of risk willing to be assumed by NOT having such insurance.
I have seen clients save hundreds of thousands of dollars through the use of such policies and in the right situation it is even an amazing asset protection tool.
If you would like more information on utilizing long term care insurance as a part of your overall estate plan feel free to give us a call!