Long Term Care Insurance: Yea or Nay?

Everyone who is medically eligible for long-term care insurance must be aware of the importance of this coverage.

Why? Here are 10 reasons why.

1. The odds are in your favor: Your chances of needing long-term care have risen to 70%. Seven out of ten Americans will use their policies, which is more than an auto accident or house fire. While most people wouldn’t consider living without homeowners or auto insurance, there are still many who don’t have long-term care insurance.

2. Longevity: People are living longer. More people are over 100 than ever before. We still don’t know the cures for Alzheimer’s, Parkinsons, Multiple Sclerosis, or other diseases that could lead to long-term care.

3. Independence: Parents don’t want to be a burden on their children, especially if they are raising their own kids. The sandwich generation is the baby boomers. They are responsible for caring for an elderly parent and putting their children through college. However, most retirees want independence as long as possible.

4. Spend less: If you don’t spend your entire life savings on long-term care, your estate or spouse will be left empty.

Medicaid is the most popular governmental benefit. A married couple can save approximately $100,000 while still being eligible for Medicaid nursing home benefits. To be eligible for these benefits, a single person must spend $2,000 of his savings.

However, parents want to leave something to their loved ones, even if it’s just their home, so that their children can sell it and divide the proceeds. Even if their children have been successful, every generation believes that leaving a legacy important.

5. New statistics: Unum, a major LTC carrier, reports that almost 58 percent (58%) of LTCi claims in 2006 were for individuals under 65. This age group had an average of one year in claims. Unum’s analysis revealed that 30% of these claims were for cancer, while more than 10% were for stroke-related claims. Multiple sclerosis, neurological disease and dementia were also major claims sources. These data show that LTCi coverage is more beneficial for those who are younger than they should be.

6. Insurance companies are making changes to their underwriting: In the past forty years, many policyholders who bought LTC coverage have remained with these policies longer than they expected. Many insurers used to price their plans in anticipation that certain policies would expire, which led to increased profits for the company. However, when claims rose, they had to revise their underwriting guidelines.

7. Encouragement from the government: Both federal and state governments are encouraging people to buy long-term care policies. It is obvious that if people buy long-term care insurance, there will be fewer people who can access the Medicaid and welfare programs jointly funded by both the federal and the state governments.

They have made it harder to be eligible for Medicaid. The law now prohibits strategies that elder law lawyers and certified estate planners could have recommended in the past. To encourage long-term care insurance purchases, some states offer co-op programs. The state would match the amount of the policy’s value in future LTC benefits. While most states have a cap on the benefits they offer, it is generally a good benefit for residents. Tax-qualified long-term care policies are exempt from tax.

8. Legal changes: The federal government and certain states have changed the rules regarding what Medicaid applicants are allowed to legally do in order to be eligible for benefits. The DRA (Deficit Reduction Act of 2005) was one of the most significant changes that took place on February 2, 2006. The DRA (Deficit Reduction Act) of 2005 extended the “look-back periods” for gifting from three to five years. The penalty calculation for gifting money or property would start at the date the Medicaid application was made, not the date the gift was given. The use of life estate survivorship documents is another difference. These are now treated as if they never occurred for Medicaid eligibility.

9. Estate recovery: 49 of 50 states have legislation that allows one to attach a lien on one’s equity in order to recover money contributed towards their long-term care. Any anticipated inheritance is lost.

10. Flexibility in health care: The most preferred setting for care is home. People prefer to live in their own homes, where they feel at home, rather than living in an institution setting. This choice is possible with the good home care benefits offered by most long-term care policies. People have used the home care benefits of their policies to hire a sitter or to aid them in their daily activities. Alzheimer’s disease and stroke are some of the most common conditions.

These are just a few of the reasons you can easily justify long-term care insurance to ensure your financial independence and financial security. To be fully prepared, it is prudent to research as many statistics, laws, and insurance information as possible.