What many of us should consider when thinking about long-term care planning
Hello Eagle Wealth Community,
What’s your first reaction when someone brings up long-term care insurance? A lot of people might say,
“it’s too expensive”
“the policy is confusing”
or “is it really worth it?”
The trouble is, there’s a real likelihood that you or a loved one may need it one day.
The U.S. Department of Health and Human Services estimates that 70% of people over age 65 can expect to need extended care services at some point in their lives.
Imagine what your later in life care will look like. Will you pay to have in-home care to keep up your lifestyle? Or would you downsize and transition into an assisted living community?
According to an AARP survey, most seniors want to stay in their homes as long as possible. Though the old-fashioned nuclear family dynamic is changing. Rather than living with their children, many seniors desire independence or don’t want to be a burden to their families.
There are basically two approaches when contemplating your long-term care needs: self-insure or purchase long-term care insurance. If you’re considering a policy for yourself or helping a loved one, it’s important to ask the right questions. Here’s what you should ask to better understand the costs and benefits of long term-care insurance policies.
What types of facilities are covered? Extended-care policies can cover nursing home care, home health care, respite care, hospice care, personal care in your home, assisted living facilities, adult daycare centers, and other community facilities. Many policies cover some combination of these. Make sure to ask what facilities are included when you’re considering a policy.
What’s the daily, weekly, or monthly benefit amount? Policies normally pay benefits by the day, week, or month. You may want to evaluate how (and how much) eldercare facilities in your area charge for their services before committing to a policy.
What’s the maximum benefit amount? Many policies limit the total benefit they’ll pay over the life of the contract. Some state this limit in years, others in total dollar amount.
What’s the elimination period? Extended-care policy benefits don’t necessarily start when you enter a nursing home. Most policies have an elimination period – a timeframe during which the insured is wholly responsible for the cost of care. In many policies, elimination periods can range anywhere from 20 to 100 days after nursing home entry or disability.1
Does the policy offer inflation protection? Adding inflation protection to a policy may increase its cost, but it could be very important as the price of extended care may increase significantly over time.
When are benefits triggered? Insurers set some criteria for this. Commonly, extended-care policies pay out benefits when the insured person cannot perform 2 to 3 out of six activities of daily living (ADLs) without assistance. The six activities, cited by most insurance companies, include bathing, caring for incontinence, dressing, eating, toileting, and transferring. A medical evaluation of Alzheimer’s disease or other forms of dementia may also make the insured eligible for benefits.2
Is the policy tax qualified? In such a case, the policyholder may be eligible for a federal or state tax break. Under federal law and some state laws, premiums paid on a tax-qualified extended-care policy are considered tax-deductible medical expenses once certain thresholds are met. The older you are, the more you may be able to deduct under federal law. You must itemize deductions to qualify for such a tax break, of course.3
Our job as your family CFO is to make sure you have all the information to confidently make smart decisions. Comprehensive financial planning requires looking at your entire life financial picture, not just a snapshot. This includes addressing any extended care needs.
What’s our take? While nobody likes to pay for additional insurance, we trust that peace of mind is an irreplaceable asset. There’s a lot to consider when reviewing your long-term care plan, but the best plan for you will be based on your own unique circumstances and financial goals.
If you have questions about your own policy or long-term care needs, let’s talk. Our team is on your side.
Your Eagle Wealth Team
P.S. If you already have long-term care insurance, make sure to keep your Peace of Mind Checklist up to date with the latest policy information.
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