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The Pros and Cons of Long-Term Care Insurance Explained

The Pros and Cons of Long-Term Care Insurance Explained

It might be hard to think about this now, but chances are—somewhere down the road—you may need help taking care of yourself. One question that arises from this situation is: how will you pay for it? One way to prepare for the potential cost of long-term nursing care is to purchase long-term care insurance. Unlike traditional health insurance, long-term care insurance is designed to cover the cost of long-term care services and support in a variety of settings, such as your home, a nursing home, or another facility.

Long-term care insurance policies cover such costs as assistance with routine daily activities, like bathing, dressing, or getting in and out of bed. They also help cover the cost of care if you have a chronic medical condition, disability, or disorder.

Taking into consideration long-term care costs is an important part of any long range financial plan. If you wait until you need care to buy coverage, it will be too late. Most policies require medical underwriting, and if you already receive long-term care services, you may not qualify. As a result, most people purchase long term care insurance plans in their mid 50’s to mid 60’s.

As we mention in the above video, there are two different types of long-term care insurance policies: traditional long-term care insurance, and asset based (hybrid) long-term care insurance. Both of these options have their pros and cons, but—as we mention—asset based insurance is usually the preferred option.

Traditional long term care insurance is a “use it or lose it” type policy, similar to homeowner’s insurance. If you do not need it or use it during your lifetime, you do not benefit from paying the monthly premium. The monthly premium that you do pay is based on your age, and how much coverage you want. This premium payment will increase over time, and can also continue to increase…even after you take out the policy.

On the other hand, a hybrid policy creates a pool of money for long-term care that is equal to several times your premium payments. The pool of money created for long-term care can either be used for a specified minimum period of time, or for a lifetime (depending on the insurance company). If you do not need these benefits, the policy pays a death benefit to your heirs upon your passing.

Long term care insurance is something everyone should consider, and it is important to understand the differences in the types of policies that are available. If you are apprehensive about navigating the long-term care maze, please join estate planning attorney Bill Miller for an upcoming free workshop using the form below. We’ll answer 

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Four Common Misconceptions About Long-Term Care Planning

Four Common Misconceptions About Long-Term Care Planning

With the US population aging, life expectancy increasing, and events like the Covid-19 pandemic showing us that no one’s health is secure, new awareness has arrived concerning the need for a long-term care plan. This is great news and yet with increased awareness comes an increase in the circulation of misinformation. In a bid to clear the air, we address four of the most common misconceptions concerning long-term care planning below.

1. If you or your spouse enters a nursing home, the state will seize your assets.
Medicaid, the state and federal government-sponsored program that millions of US adults rely on to pay for long-term care needs, seizes nothing when you enter a nursing home. Instead, the program simply will not chip in a dime until you, yourself, have spent down your “countable” assets to a level that qualifies you for assistance. This does not mean only very low-income individuals are eligible to receive Medicaid, however; it simply means that you need to work with an experienced estate planning attorney well ahead of time to put a plan in place to protect assets so that you are able to qualify for Medicaid more quickly when the time comes.

2. If you use Medicaid to pay for care, you risk losing your home.

This misconception is similar to the above but deserves a separate address because of how often it is repeated.

As long as the person using Medicaid (the beneficiary) or their spouse continues to live in their home, it can neither be taken nor forcibly sold. This is the case even if you are single as long as you communicate your “intent to return home” in writing when you enter a nursing home.

It is true that upon your death, the state can file a claim against your estate (which includes your home) in order to repay nursing home expenses covered by Medicaid but even this can be avoided with help from an experienced attorney.

3. Making a financial gift disqualifies you from Medicaid for five years.
Medicaid employs a look-back period wherein any financial transfers or gifts made in the five years prior to applying for the program may be counted against your eligibility. This does not mean you will be barred from receiving benefits if you make a gift during this period. However, it does mean that you may have to endure a penalty period before Medicaid picks up the cost of your care.

This penalty is based on the value of the gifted assets made and how many days of long-term care they could have been used to pay for. Once more, an experienced estate planning attorney can help you work out specifics and determine the most affordable way for you to gain the coverage you need.

4. It is too late to start long-term care planning.
All too often, folks who are already receiving nursing home care or those with imminent need assume it is too late to engage in planning that preserves their assets. This is simply never true. You can always, for instance, use cash to pay down your mortgage and thereby convert a non-exempt asset into an exempt asset and thus save thousands. While it is always better to begin planning early, such last-minute strategies help you retain a large percentage of all that you have worked so hard to gain.

To learn more about long-term care planning or emergency strategies to ensure you have the coverage you need, do not hesitate to call Miller Estate and Elder Law at (256)251-2137 or reach out via the contact form on our website.