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The old stand-by: LTC insurance

Long-Term Care Insurance (LTCI) has been available for over 40 years. It is privately held insurance that pays for all levels of home care, adult day, assisted living, nursing home care, and hospice. It is the easiest way to protect your assets, provide a network of support for your family, receive quality care and remain independent. There are many ways to design a policy that are comprehensive yet affordable.

When you purchase LTCI, you are purchasing money from the insurance company that will provide a steady stream of income to be used for your LTC expenses.


TYPES OF LONG-TERM CARE INSURANCE POLICIES IN NYS

  • NYS PARTNERSHIP PLANS are state mandated policies that combine private LTCI and Medicaid Extended coverage. All levels of care are included as well as 5% or 3.5% compound inflation options. There are three total asset protection policies and two dollar for dollar asset protection policies. If you exhaust your total asset protection benefits and still require care, you can apply for Medicaid without having to spend-down your assets. ALL YOUR ASSETS are protected. There are no look-back or penalty periods. Gifting can be done at any time. If you exhaust your dollar for dollar asset protection benefits and still need care, the amount of assets protected will equal the amount of benefits paid by the policy. Once you qualify and apply for Medicaid Extended Coverage, you will have to contribute your income to the cost of your care according to Medicaid guideline. If you relocate, there is some asset protection based upon the dollar for dollar model.43 states have reciprocity with NYS.
  • TRADITIONAL LONG-TERM CARE INSURANCE offers more enhancements, riders and inflation options. There is greater flexibility of design. However, if you exhaust your benefits and still need care, you will have to use your assets unless you have done some legal planning.

WHAT DETERMINES A LTCI PREMIUM?

  •  Age: The older you are, the more expensive the premiums
  • Gender: Women pay more
  • The Main Features of a Policy
  • Underwriting

THE MAIN FEATURES OF AN LTCI POLICY

  •  Daily/Monthly Benefit: The amount of money the policy pays on a daily or monthly basis for your care. The amount selected should be based upon the cost of care in your geographic location, how much of the risk you would like to transfer to the insurance company and how much you would like to pay out-of-pocket to make up the difference.
  •  Length of Coverage: The amount of time the policy will pay for your care. The average length of stay in a nursing home is approximately 2 years but more people are staying home or living in an assisted living facility and may never enter a nursing home. On average, most individuals will purchase 3 years of coverage. If your family’s health history includes such conditions as Alzheimer’s or Parkinson’s you may want to consider a longer period of coverage.
  • “Pool of Money”: When you purchase LTCI, you are buying a pool of money that supplies a steady stream of income for your care. The way to determine the pool of money is to multiple your daily/monthly benefit by the length of coverage. For example, if you have a $200 daily benefit with three years coverage, your pool of money would be $219,000 ($200 x 1095 days).
  •  Inflation: Because you may not use your policy for a long time, you want the daily/monthly benefit and pool of money to increase so that you have adequate coverage in the future. There are many inflation options to consider. Your age and income will determine which option is best for your needs.
  •  Elimination Period: This feature is often called the deductible or waiting period. It is the amount of time that you pay out-of-pocket before the policy starts to pay benefits. The longer the elimination period the lower the cost of the premium. The selection of this feature depends upon how much of the risk you feel financially comfortable assuming and how quickly you want your benefits, especially if you would prefer to stay at home. Some elimination periods are based on calendar days, others on service days.

INFLATION Your plan needs to take into consideration future LTC costs.

Hopefully, when you select a LTC policy, you will not use it for 20 to 30 years. That being said, you need inflation protection so that it maintains its value.

For a very long time, 5% compound was the chosen gold standard for inflation protection. Today, because of low interest rates and low lapse ratios (individuals hold onto their policies), the LTC insurance carriers for stand-alone policies have made 5% compound cost prohibitive. Currently the gold standard is 3% or 3.5 % compound which seems to be adequate based upon the Genworth 2017 Cost of Care Survey that you can access online.

There are many other inflation options depending upon the LTC insurance company you are working with. If you select a less robust inflation option, compensate for this with a higher daily benefit.

Inflation selection should be based upon your age, how much you can afford to pay out of pocket, your geographical location and affordability of premium.

UNDERWRITING

All LTC insurance policies are medically underwritten, which means you should be in relatively good health when you apply. Each company approved to sell the insurance has an underwriting guideline that will determine your insurability. Depending upon the company, certain conditions are uninsurable. Companies will request medical records from your doctor, conduct a telephone interview, a face-to-face interview or a memory screening. If you are determined to be uninsurable, you can look into a life insurance policy with a chronic illness rider.

TAX ADVANTAGES

  •  20% NYS tax credit!
  •  Age banded federal tax deduction permissible if a percentage of medical expenses are met against your adjusted gross income
  •  Business tax advantages for S-Corps, C-Corps, Partnerships, etc.

CONSUMER TIPS:

  •  Start the LTC “Conversation”!
  •  There is a plan for everyone. Not having a plan means someone else will have a plan for you.
  •  Take the Good, Better or Best approach with LTCI. It is better to have some coverage than none at all. Policies can be designed for affordability and still be comprehensive. A daily benefit can be geared towards home care rather than nursing home care. This will lower the premium.
  •  If most of your assets are in an IRA or pension plan, consider placing your home into an irrevocable trust and purchase a LTCI policy geared towards home care and assisted living. It will keep the cost affordable.
  •  Home care features differ between policies. Some policies have a cash benefit or rider that will allow you to use independent caregivers, friends or neighbors or even family members.
  •  Select inflation protection!
  •  Select a shorter elimination period if your goal is to stay at home or if you do not have enough liquid assets to cover out-of-pocket expenses for an extended period of time.
  •  Make sure you can manage the premium. It should not interfere with your lifestyle.
  •  Work with an independent agent who represents multiple life and LTCI companies and is certified to sell the Partnership plans.
  •  Planning for LTC is a process. If necessary, meet with your agent several times in order to be fully educated. You should purchase the appropriate coverage when you are ready and not at your agent’s timeframe.

“Susan, although we have been paying premiums for 17 years, I don’t regret a dime. If either of us were to need intensive care, it would almost certainly exceed this. Thank you for your clear explanations…CV, Rochester, NY