You know how expensive nursing homes are, and you want to make sure you can afford the care you might need one day. One option you might consider is a long-term care (LTC) insurance policy. However, these policies aren’t right for everyone, and it’s easy to pay more in premiums than you’ll eventually need out of the coverage. We explain how to decide how much—if any—long-term care insurance you need.
What to Consider When Looking at Long-Term Care Insurance
There are a couple of types of long-term care coverage available now. One option is a whole-life insurance policy that you can draw from for long-term care. This is considered a “hybrid” policy, and the advantage is that the beneficiaries of your life insurance will get whatever is not used towards your care. However, they are expensive policies—usually two or three times more expensive than traditional insurance. With a traditional LTC policy, you pay monthly or annual premiums based on the coverage that will be provided by the policy if you one day need a nursing home. Before buying one of these policies, we advise our clients to consider:
- The time period. You can decide how many years of coverage you want. The longer that is, the higher your premiums will be. The reality is that over 90 percent of people who enter a nursing home die within 24 months. Before buying more than two years’ worth of coverage, you should take a look at your family history—typical longevity, incidents of dementia, etc.—to get an idea of what you might need. Generally, a person with Alzheimer’s will need nursing home care longer than someone with physical health concerns. If the five-year lookback for Medicaid eligibility is a concern, you might want to consider a five-year policy.
- The daily rate. On average, skilled nursing care costs about $150 per day. Before deciding on how much coverage you need from your LTC policy, calculate your daily income, and subtract that out. For example, if you will have an income of $60 a day from a pension or Social Security, you only need to purchase coverage of $90 per day.
- Other benefits. Don’t overlook other long-term care benefits to which you will be entitled. If you do not have significant assets and do not have an income, you will likely qualify for Medicaid to cover a nursing home, so you do not need any LTC insurance at all. If you are a Veteran or the spouse of a Veteran, you may qualify for Veteran benefits of up to $1500 a month, so you will only need enough coverage to make up the difference.
Like everything else to do with retirement and aging, the more planning you do now, the better off you will be. Often the biggest impediment to buying long-term care insurance is the cost. However, combining estate planning tools like Asset Protection Trusts with your long-term care insurance needs can often result in lowering the insurance needed and thus the overall cost. We would be happy to discuss these options with you.
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If you are looking for medicaid planning advice, you need to speak with an experienced medicaid planning attorney as soon as possible. Contact us online or call our Texarkana office directly at 903.223.5653. We also have offices in Tyler, Paris, Longview as well as Magnolia, AR!