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Protection Planning: Using Long-Term Care Insurance (LTC)

Protection Planning: Using Long-Term Care Insurance (LTC)

June 17, 2019


 What is it Long-term care insurance (LTCI)?

In return for your payment of premiums, a long-term care insurance (LTCI) policy will pay a selected dollar amount per day (for a selected period of time) for your skilled, intermediate, or custodial care in nursing homes and, sometimes, in alternative care settings, such as home health care. Because Medicare and other forms of health insurance do not pay for custodial care, many nursing home residents have only three alternatives for paying their nursing home bills: their own assets (cash, investments), Medicaid, and some type of LTCI.

In general, long-term care refers to a broad range of medical and personal services designed to provide ongoing care for people with chronic disabilities who have lost the ability to function independently. The need for this care often arises when physical or mental impairments prevent one from performing certain basic activities, such as feeding oneself, bathing, dressing, transferring, and toileting.

Long-term care may be divided into three levels:

  • Skilled care--Continuous "around-the-clock" care designed to treat a medical condition. This care is ordered by a physician and performed by skilled medical personnel, such as registered nurses or professional therapists. A treatment plan is drawn up.
  • Intermediate care--Intermittent nursing and rehabilitative care provided by registered nurses, licensed practical nurses, and nurse's aides under the supervision of a physician.
  • Custodial care--Care designed to assist one perform the activities of daily living (such as bathing, eating, and dressing). It can be provided by someone without professional medical skills, but is supervised by a physician.

How is LTCI used as a Protection Planning Tool?

The risk of contracting a chronic debilitating illness (and the resulting catastrophic medical bills incurred) is considered by many to be one type of risk best transferred to an insurance company through the purchase of a traditional LTCI or an insurance product (i.e. an annuity or a life Insurance) with LTCI Rider.

A number of factors can increase your risk of requiring long-term care in the future. Naturally, your health status affects your likelihood of incurring a long stay in a nursing home. Indeed, people with chronic or degenerative medical conditions (such as rheumatoid arthritis, Alzheimer's disease, or Parkinson's disease) are more likely than the average person to require long-term nursing care. And because women usually outlive the men in their lives (if any), females stand a greater chance of requiring long-term nursing care. However, if you already have a primary caregiver (like a spouse or child), your likelihood of needing a long stay in a nursing home will be less--particularly if you're a man. Because the cost of long-term care can be astronomical and may exhaust your life savings, purchasing LTCI should be considered as part of your overall asset protection strategy.

Bear in mind, also, that purchasing an LTCI policy while you are still healthy helps you to maintain control over your assets until such time as you actually require care. This stands in contrast to most Medicaid planning tools. Medicaid planning can also enable your nursing home bills to be subsidized by a third party (the state); however, it often involves transferring your assets promptly to avoid Medicaid penalties. With LTCI, there is no need for you to divest yourself of assets years ahead of time.

What are the next steps involved with Protection Planning?

There are many factors involved when properly planning for a Long-Term Care Insurance plan, including a decision between the various type of coverage such as, a traditional LTCI vs a hybrid insurance product (i.e. Life Insurance Policy with a Long Term Care Rider or Annuity with a Long Term Care Benefit).

There are always pluses and minuses to consider in determining the solution that would best fit your long term care needs.  Regardless the solutions, having a discussion and a protection plan is always a MUST as you enter that stage in your life. 

 Set aside some time to speak with myself or a member our team at WBBethesda regarding this topic!


***The information in this blog post is intended to be informational.  It is NOT intended as tax or legal advice.  It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.


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