Long-term care planning should be part of most comprehensive estate plans because we all stand a good chance of needing long-term care (LTC) at some point. The reason LTC planning is essential is the high cost of that care and the need to have a plan in place to pay for that care. The Medicaid lawyers at Nash Bean Ford & Brown, LLP help you understand whether purchasing a long-term care insurance policy is the right option for you.
Why Is Long-Term Care Planning Important?
Long-term care planning should be part of your estate plan because there is a high probability that you will need LTC and if you do need care, it will likely be expensive. When you enter your retirement years (at age 65) you will already stand at least a 50 percent chance of eventually needing some type of long-term care. The older you get, the greater the odds of needing LTC. Across the nation, the average cost of a year in LTC was around $90,000 for 2018. Fortunately, Illinois residents pay less than the national average, with that same year running just over $80,000 for LTC. With an average length of stay of three years though, it becomes clear that an LTC bill could wreak havoc with your finances even at the lower average cost – and deplete your retirement nest egg. Why would you be responsible for paying your LTC expenses? Because Medicare won’t cover LTC costs and most basic health insurance policies also exclude expenses related to long-term care.
How Does Long-Term Care Insurance Work?
Long-term care insurance is a separate insurance policy that is limited to covering costs associated with LTC. It works in much the same way as hurricane insurance works for your home. Because most homeowner’s insurance policies don’t cover hurricane damage, insurance companies offer homeowners the option to purchase a separate hurricane insurance policy that only covers losses that are the result of hurricane damage. LTC insurance works the same way by only covering expenses that are related to long-term care.
What people often fail to pay attention to, however, are the limitations and exclusions that apply to an LTC policy. Because every policy is different, you must read each policy to see if any of these limitations and/or exclusions apply. When evaluating an LTC policy, pay particular attention to the following:
- The cost you will pay over the lifetime of the policy. Premiums increase the older you are when you take out a policy; however, even a lower annual premium will add up if you are paying that premium for 20, 30, or even 40 years before you actually use the coverage.
- Waiting period. Many MTC policies have a waiting period during which time the policy will not cover expenses, meaning you will be responsible for covering them.
- Maximum benefits. Be sure you understand if the policy has an annual or lifetime maximum because you will be responsible for any expenses that exceed those maximums.
- Coverage away from home. Will the policy cover you outside of the U.S.? If not, are you planning to remain in the U.S. when you retire?
- Automatic termination. Some LTC policies terminate at a specific age or after a specific number of years, once again leaving you responsible for additional expenses.
Is Medicaid Planning a Better Option?
Long-term care insurance isn’t the only option, nor is it usually the best option, when it comes to planning or the high cost of long-term care. What many people do not realize is that while Medicare won’t cover LTC expenses, Medicaid will. Medicaid eligibility can be problematic though if you failed to plan ahead. If you believe there is even the possibility that you will need to rely on Medicaid in the future, including a Medicaid planning component in your estate plan is imperative to ensure that your assets are protected and that you are eligible for Medicaid when the time comes that you need long-term care.
Contact Medicaid Lawyers
For additional information, please join us for an upcoming FREE seminar. If you have additional questions about long-term care insurance versus Medicaid planning, contact the experienced Medicaid lawyers at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.