Common Misconceptions About Long Term Care Insurance
This edition of the E-Newsletter continues a series on common misconceptions about Elder Law, Estate Planning and Medicaid.
In this newsletter we discuss misconceptions about Long Term Care Insurance. All prior newsletters are saved on our website. You can read them by clicking here.
Incorrect: If I have Long Term Care Insurance, I do not need to worry about nursing home costs.
Correct: Many people have excellent policies that cover a substantial portion of nursing home costs, but we have seen many clients with policies that will only cover a small part of the costs. It is important to review the actual terms of the policy and explore other options that may be available.
Wide Variety of Coverage Options with Long Term Care Insurance
There is a wide variety of policy coverage options with long term care insurance. You should retain the services of a knowledgeable financial planner to assist you in selecting the ideal coverage. Some examples are:
- The daily benefit for nursing home and home care such as $200 or $300 per day or more
- The length of the coverage term such as 3 years, 5 years, or life
- The maximum policy limits such as $250,000 or $500,000 or unlimited
- Inflation rider
- Whether the policy covers home care, assisted living, day care or just nursing home care
The premiums for your policy will be based on how comprehensive the coverage is that you purchase. The major disadvantage of long term care insurance is the cost.
The premiums tend to be very expensive if you purchase comprehensive coverage. If you purchase lower coverage to reduce the premium costs, the policy might run out and you could still lose your life savings and family home.
For example, if you purchase a $200/day coverage, but your Nursing Home costs $350/day, you will lose your life savings at a rate of $150 per day ($4,500 per month).
Another example is if you purchase a policy that only covers you for 3 years and if you stay in the Nursing Home for longer than 3 years, you will lose your life savings rapidly after the 3 year policy runs out.
Also, annual premiums can increase over time. Recently we had a client come to our office who told us that he just received a letter from his insurance company that his premium was going to double.
Long Term Care Insurance with an Irrevocable Trust-Best of Both Worlds!
If you are unable to afford the premiums for lifetime coverage, but you desire the benefits of having a long term care policy such as for the extensive home care coverage, another option is to purchase long term insurance that covers you for a shorter period of time and also set up an Irrevocable Trust to get by the 5 year lookback period to protect you from losing your life savings after the long term care policy coverage runs out and you need to apply for Medicaid. This way you get the best of both worlds.
For a discussion of Irrevocable Trusts, please see our website by clicking here.
At the Koldin Law Center, P.C., located in East Syracuse, New York, we have over 50 years of experience helping individuals plan for immediate crisis and long term care. Our attorneys are available to discuss your estate planning options. We do not charge a fee for the initial consultation. We welcome your children, family attorney, accountant, and/or financial planner to be present at the initial consultation.
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