What is Long Term Care (LTC) Insurance?
Long Term Care is "catastrophic coverage" triggered when one requires assistance with two of six daily living skills: Bathing, Dressing, Toileting, Continence, Transferring (moving from one place to another), feeding oneself (once served). It is also triggered by significant cognitive impairment requiring substantial supervision for safety concerns. Statistics show that more than 30% of people will eventually access their long term care policies. The cost for care is high, and the value of LTC insurance serves three primary purposes:
- Financial Leverage: It allows you to use retirement accounts more effectively, ensuring the ability to leave more available for living in retirement.
- Family Direction: It provides a clear plan for the family, removing the "caregiver" burden from relatives.
- Quality of Care: It provides the funding to hire professional caregivers or move into a high quality facility, offering freedom to choose better care options.
Medicare does not pay for custodial long term care.
Medicaid is through the government for the poor. In order to qualify, you must spend down your assets to poverty level and any income will be used toward the cost of care.
Traditional Stand-Alone Long Term Care
A traditional life insurance policy is a use it or lose it policy. Statistics show the greatest return for the premium paid. Funding can be through an existing Health Savings Account up to age based limits.
Tax benefits are available for the self-employed and business owners. Potential to meet Medicaid Lien Protection Limits and Partnership Requirements.
Hybrid Long Term Care
A hybrid long term care policy is a type of policy that combines long term care coverage with another financial product - most commonly life insurance or sometimes an annuity. These policies leverage the long term care benefit vs. the death benefit of life insurance.
Features of a hybrid policy (varies with each product):
Inflation Protection, Guaranteed Premium, Return of Premium (upon request or at death), Cash Benefit Options, and choice of premium payments (Single Payment, Limited Pay, Lifetime Payments
Life Insurance with LTC Rider
A life insurance product with a rider allows for a portion or all of the death benefit to be eligible for funding qualified long term care expenses.
Life insurance products are designed to optimize the death benefit. When a long term care rider is added, the value of the long term care benefit is limited by the death benefit and does not have an inflation benefit option. Depending on the product and carrier, the long term care benefit may be a percentage of the death benefit at the time of purchase or at the time of claim.
Important Note - if the primary purpose of the life insurance benefit is to provide a death benefit, if the long term care rider is exercised, it is the death benefit that is being depleted to fund the care.
Other Options: Annuities and, Non-Insurance Products
Annuities with Long Term Care Riders: Annuities with long care riders and annuities with added long term care benefits are available.
Home Care Contracts: Can be used indepencently or along with a long term care policy. These policies are not insurance, and are purchased as home care "hours".