Should You Buy Long-Term Care Insurance?
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UPDATED: Jul 10, 2018
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Long-term care insurance isn’t for everyone. Many people either can’t afford it now or won’t have the income to pay the premiums after they retire and before they need the care. If they are unable to keep up the premium payments they lose all the premiums they’ve paid and receive nothing.
Currently the Medicaid program pays for most long-term care for the elderly. The difficulty with the Medicaid program is that people have to spend almost all their resources before they qualify. This is particularly difficult for people who only need nursing care temporarily. If they deplete their resources in paying for a nursing home, they are impoverished when they return to the community. A spouse who is not in a nursing home can also be left impoverished. Medicaid does not cover much home care, so people who are dependent on it may be forced into a nursing home when they might have stayed at home with a moderated level of care.
Medicaid requirements also penalize those who have saved money. While people who have not saved are given care right away, those with savings have to spend it before they can get benefits. Some people want to pass on property to their children and grandchildren and may want to provide for special cases, such as care for a disabled family member or a college fund for the grandchildren. In these cases long-term care insurance may be a good choice.
In the long run private long-term care insurance may help relieve the incredible burden on the Medicaid program, particularly as the large baby boomer generation reaches the age where they need long-term care. Because of this the federal and some state governments have passed some incentives for people to purchase insurance. Premiums for long-term care insurance may be deducted from income for federal taxes if the total cost for premiums and medical expenses exceed 7.5 percent of the adjusted gross income. In a few states, California, Indiana, and New York, people who purchase long-term care insurance can receive Medicaid benefits without depleting their resources after the covered care period is up.
The people who have the most motivation to buy long-term care insurance are those who can afford it and who have assets to protect and/or who are determined to live out their lives at home. Those who buy this insurance should study the coverage in various policies carefully. How much is the daily payment and what is the current cost of care? How much will it cost in premiums to cover increased costs in the future? How long do you have to wait to receive benefits? Does the policy cover home care and/ day programs?
Finally, one of the most important considerations is the reliability of the insurance company. You want a company that is financially stable and is unlikely to seek state permission to raise premiums. You also want a company that handles claims fairly and quickly. You can get information about companies by searching information online. For example, you can find financial strength ratings for insurance companies on Insurance pages.
After you purchase, be sure to check your coverage regularly to make sure your policy is keeping up with long-term care costs.