As healthcare quality improves, many people are living longer lives, sometimes decades past retirement. According to the Administration for Community Living, the cost of long-term care, such as that received in a private or semi-private room in a nursing home, or in a one-bedroom unit in an assisted living facility, can be between $3,628 and $7, 698 per month. These costs can place a significant financial burden even on affluent individuals, and can reduce the total value of the estate available for loved ones to eventually inherit. If you have concerns about the impacts the potential need for long-term care could have on your financial situation and the legacy you leave behind, you are not alone. Many people may not realize that their estate plan can incorporate long-term care insurance. Selecting the right long-term care insurance policy can ensure that funds are available for your care in the future, while also protecting the value of your estate. A knowledgeable San Francisco estate planning lawyer from Von Rock Law may be able to answer your questions about long-term care insurance; contact us today at (866) 720-0195.
What Is Long-Term Care Insurance?
According to the Administration for Community Living, long-term care insurance is a specific type of insurance separate from health or life insurance. This type of insurance is intended to pay the costs of long-term services such as personal or custodial care in the policyholder’s dwelling. This may be the individual’s private residence, or may on the other hand refer to an individual bedroom or suite in a nursing home or assisted living facility. These policies reimburse the policyholder for a portion of the total cost of services, and may cover assistance with the tasks of daily living, or the individual’s room and board.
The cost of a long-term care policy varies according to a few factors:
- The customer’s age when they purchase the policy
- The policy’s maximum per diem
- The maximum number of days (or years) the policy covers
- Optional benefits the policyholder selects
Many long-term care policies require medical underwriting before approval. Therefore, people in poor health or those already receiving long-term care services may not qualify for this type of policy, so it is important to decide if this is a policy for you before you become ineligible to purchase one. In some cases, individuals who are not eligible for a standard long-term care insurance policy may still be able to purchase a limited policy or one with a higher rate.
What Is the Biggest Drawback of Long-Term Care Insurance?
One of the main drawbacks of long-term care is its often intimidating expense. Although many people may find that the cost of a long-term care insurance policy is worth the peace of mind it brings, it is important to note that premiums may be high, even for policyholders in good health who do not need medical underwriting.
Premiums for this type of policy typically increase over time, as well, which is something individuals may need to consider when budgeting. Additionally, policyholders who develop a serious illness like cancer or dementia, may no longer be considered for policy renewal when the term expires.
What Is the Rule of Thumb for Long-Term Care Insurance?
Von Rock Law clients often have questions regarding long-term care insurance, and one of the most common is how much coverage they need. People with a high net worth, or those with few assets to protect, may not require any coverage or a minimal amount. A good rule of thumb to determine if you need long-term care insurance is to start by determining your net worth; if it is between $150,000 and $1 million, then the benefits of the policy are likely worth the expense. However, this may not be the case for you, even if your net worth (including assets, retirement accounts, and pensions) falls within this range. An estate planning attorney experienced in insurance policy selection can review your financial circumstances, healthcare expectations, and long-term goals with you to help you determine the best policy options for your situation.
Gender and Long-Term Care Needs
Women may be more likely to require long-term care services than men. Women tend to live longer on average than men, so the length of time they may require services can easily be longer than would be likely for men of roughly comparable age and health at the time of policy purchase. Women are also at increased risk, compared to men, for some chronic medical conditions. Osteoporosis is a particular concern as women age, as this condition greatly increases the risk of sustaining a fracture through even a minor slip or fall, as the National Library of Medicine explains. Repeated fractures and the need to limit the likelihood of bumps or falls can severely curtail senior women’s ability to care for themselves or get around without assistance. Conversely, men are more likely to suffer from an acute health condition that leads to a quick death, meaning that they are less likely to require long-term in-home care.
What Are Common Benefit Limits on Long-Term Care Insurance Policies?
The most common benefit limit for a long-term care insurance policy is how long it is valid. Policy limits can be as short as two years or up to a lifetime. Typically, the longer the benefit period for a policy, the higher the premium will be.
Those considering purchasing long-term care insurance should keep in mind that although the benefit period is expressed in the policy as a period of years, it is not based on a calendar year. Rather, it is a multiplier that the insurance carrier uses to determine the total dollars a policy will pay. If the policy terms are $100 per day for four years, the policy may not end at the end of the fourth year, but instead end when the total policy limit of $100 per day x four years is reached. If the policyholder only needs $50 per day of services for the first year (or even all four years), the policy could last much longer than the stated “four-year” term.
What Is Excluded in a Long-Term Care Policy?
Pre-existing conditions are not generally covered in long-term care policies. For the purposes of assigning premiums and policy coverage for long-term care insurance, a pre-existing condition is usually defined as any medical condition with which the policyholder was diagnosed, or for which the policyholder had received treatment, before the policy went into effect.
Examples of conditions commonly excluded from coverage under long-term care insurance policies include:
- Cancer
- Alzheimer’s Disease and dementia
- Parkinson’s Disease
Companies offering long-term care insurance policies often follow a practice similar to that employed by those offering term or whole life insurance by requiring documentation of an applicant’s health at the time of application, and in the case of long-term care the individuals applying may be required to submit copies of their medical records to document which conditions pre-existed the policy effect date, or to show that a condition has developed more recently than the date on which the policy became active, in order to have the cost of care for that condition reimbursed.
Do You Have Questions About Long-Term Care Insurance?
The experienced estate planning attorneys with Von Rock Law provide compassionate, carefully considered advice and assistance to individuals and families to support them in making informed decisions about their medical care and their legacy. We may be able to help you anticipate future medical or custodial requirements and tailor a custom estate plan to address your needs. We understand the significance of incorporating long-term care insurance into your estate plan and are dedicated to guiding you through the process. To schedule a consultation, please call (866) 720-0195.
