Should You Consider Long Term Care Insurance?

If you are in your 20's and 30's, the thought of assisted living and nursing home care is probably the least of your concerns right now. However, if you are in your 40's, 50's, or early 60's, you may wish to research and even purchase long term care insurance. What are the advantages of having long term care insurance?

To begin with, assisted living and nursing homes are not only intended for the elderly. If you are ever injured and require rehabilitation, you will probably spend some time in the hospital, after which your doctor will probably recommend a nursing home or assisted living facility. Even if you are sent home, you will still require home care and physical therapy, and these services are probably not covered by your current insurance plan.

In many states in the USA, nursing home care can be expensive, ranging from $100-$200 per day. Nurses and even personal assistants can charge up to $30/hour for their at-home services. This means that, if you are ever hospitalized and then require several months to recuperate from an injury, you could end up spending several thousand dollars in caretaker costs.

Alternately, you may be diagnosed with a debilitating illness such as Alzheimer's Disease, or you may find that caring for yourself in your home is becoming too difficult. In such cases, you may wish to move to a nursing home or an assisted living facility.

You may have heard that federal and state assistance programs such as Medicaid and Medicare cover some of the costs of long term care. There are some problems with either program, however. First of al, Medicaid is typically intended for individuals of very low income. If someone of moderate means wishes to take advantage of Medicaid coverage, that person must first "spend down" the majority of his or her assets before becoming eligible for Medicaid coverage. In some states, a person cannot qualify for Medicaid coverage unless he or she has no more than $2,000 in personal assets!

Medicare, which is the federal health plan carried by many individuals who are 65 years of age and over, covers some of the costs of long term care, but not all. In order to even qualify for skilled nursing or rehabilitation coverage, you must be hospitalized for at least three days. Furthermore, Medicare coverage is provided only for government approved nursing homes.

As a result of these difficulties, most states have approved the Long Term Care Partnership Program, which is a partnership between private health insurers and the federal and state governments. The program works in the following manner: you purchase a qualifying insurance policy and pay its premiums year-to-year. When you require long term care, the policy steps in and covers the cost of services such as assisted living, skilled nursing, home care, and even hospice care.

There are several incentives to having a long term care insurance policy. One of these incentives is the asset disregard benefit, which means that every dollar that the policy pays out is disregarded by Medicaid when you attempt to qualify for assistance from that program. In other words, if you take out a long term care policy with a $200,000 asset disregard benefit, you will be allowed to retain $200,000 of your own assets after your policy pays this sum out to the nursing home or other long term care facility- yet you will still qualify for Medicaid assistance.

The other incentive for obtaining a long term care insurance policy is that a portion of your premium can be deducted from your income taxes as a medical expense. In addition, the money that is later paid out from your policy to the nursing home or other long term care facility is not taxed as personal income.

Finally, your long term care insurance policy will carry some type of inflation protection, allowing the policy to continue to pay for your care even as its costs increase over time. In most cases, inflation protection is initially paid out by you, based on your age. If you are under 61 years of age, you are required to pay an additional 5% of your policy price to account for inflation. Between the ages of 61 and 76, you will only need to pay a single, discrete sum for inflation protection. After the age of 76, you will no longer be required to pay for inflation protection.

References:

Nursing Homes: Paying for Care http://www.medicare.gov/Nursing/Payment.asp

National Clearinghouse for Long-Term Care Information http://www.longtermcare.gov/LTC/Main_Site/index.aspx