Planning for Long-Term Care

Good health is a gift, but we can’t assume that it will last forever. An effective financial plan should factor in the costs associated with aging, such as long-term care. Long-term care describes a variety of services which help meet both medical and non-medical needs when people are unable to care for themselves. Long-term care services are provided at home or in assisted living or nursing homes and include things such as assisting with normal daily tasks or providing skilled medical care.

The number of Americans age 65 or older is projected to more than double over the next four decades. As the nation’s population continues to age, an increasing number of individuals will require some form of long-term care. As of 2009, the cost of a stay in a nursing home varied from $121 to $352 a day. The average cost of home care ranged from $13 to $30 per hour.

In most states Medicaid pays for some long-term care services, however most often eligibility is limited to individuals with limited income and personal resources. As a result, many people buy long-term care insurance to protect themselves and their families. Another growing trend: baby boomers buying long-term care insurance policies for their parents—providing protection for both the parents’ estate and themselves.

If and when you should purchase long-term care insurance is a decision that deserves careful consideration, including a review of your current resources and your estate planning objectives.

What Long-Term Care Insurance Offers

The typical long-term care insurance policy will pay for custodial care after a waiting period has expired, reimbursing expenses up to a maximum limit specified in the policy. Eligibility for reimbursement usually hinges on the covered individual’s inability to perform several activities of daily living, such as bathing and dressing.

Buying a long-term care insurance policy helps you maintain control of your assets and improve your chances of getting the health care you want.

Long-term care insurance premiums can also provide income tax benefits: if you itemize deductions on your tax return, amounts paid for long-term care premiums may be deductible as a medical expense up to a certain dollar amount. (The amount of your total medical expenses that exceeds 7.5% of your adjusted gross income is deductible.)

Because you’ll pay much less for a policy if you buy it when you are young and healthy, many advisers recommend that their clients purchase long-term care insurance when they are in their 40s or 50s.

Comparing Policies

Long-term care policies can vary widely, in cost as well as the range of benefits they offer. Key considerations are the benefit amount paid per day, the maximum amount paid out over time, the length of time over which benefits will be paid and the waiting period before benefits will be paid. You should compare several policies and weigh all of these considerations against your financial circumstances and your long-term care objectives.

Regardless of your personal goals, there are several criteria that should be part of any plan you consider. Choose a long-term care policy that is guaranteed renewable, that provides inflation protection and that does not require hospitalization before benefits are payable. Look for policies that offer a premium waiver while you are receiving benefits and that permits the option of upgrading or downgrading your coverage.

As part of your personal financial and estate planning, long-term care insurance can offer some protection. Whether you are considering a long-term care insurance policy for yourself or your parents, I can help you evaluate your financial situation and review the features of any insurance plan you may be considering.