Nursing home care costs can be outrageous should you become critically ill or injured. You might know from reading my blog articles or from reading my eBook UNDERSTANDING LONG-TERM CARE MEDI-CAL that Medicare would cover only a minimal amount of those costs. Moreover, Medi-Cal may only be part of the solution for you. Private insurance doesn’t seem like a good bet either if you’ve heard horror stories about skyrocketing premium costs and difficulties in even obtaining long-term care (LTC) insurance in the first place.
There may be a better way. “Hybrid” policies essentially combine life insurance or an annuity with LTC coverage. (The benefits can be known as “accelerated death benefits” or “living benefits,” or the coverage can be called “life/long term care,” “linked benefits,” or a “combo” policy.)
This type of policy will pay if you need nursing care, but, if you never need that, then the policy functions like standard whole-life coverage. It’s a win-win. Say, for example, you buy a hybrid policy with a $100,000 death benefit. You eventually need $50,000 of that coverage to pay for LTC. Then, when you pass, your beneficiary would receive a $50,000 payout from what’s left of the original $100,000 coverage.
Some plans offer tax-free death benefits to your heirs if your LTC benefits are not fully used or needed. They may return your premiums if you change your mind down the road. Premiums can be locked in from the initial purchase date, with a guarantee that they will never increase. Those who already hold a legacy policy with a large cash value may be able to roll that value over, tax-free, into a new hybrid policy.
For those who can afford to pay premiums in a lump sum in advance, LTC coverage could amount to as much as twice the face value of the policy. Compare that with simply setting money aside for LTC expenses at a rate of five percent interest. It could take as long as thirty years to save for what this policy offered on its face.
There is a wide range of coverage, depending on the policies. They may cover different services, delivered at home, in a facility, or both. The monthly or daily benefits can vary. Some policies require an elimination period (a delay between the time a doctor qualifies you for coverage, and actual payment); some do not. Some provide inflation protection. Some provide adjustable rates, depending on how much the insured might need LTC as against the death benefit.
Always also remember that the carrier must have the long-term financial stability to pay claims, and to remain in business, for decades to come.
To sort through all these intricacies, the National Association of Insurance Commissioners has issued a free and comprehensive Shopper’s Guide to LTC Insurance. We encourage all our our clients to at least look into the idea of purchasing LTC Insurance as it can serve as a vital tool in the planning arsenal of Elder Law attorneys like myself. The guide below provides especially helpful shopping tips at pp. 31-36. Find the publication here
We can create a long-term care estate plan that incorporates a hybrid LTC Insurance policy with a trust that will protect all of your bank accounts and real property (like your home) in the event you need long-term care. If you are interested in protecting your savings and your home, we would welcome the opportunity to discuss an estate plan that works for you. Please contact us today at 877-585-1885 to schedule a free consultation to discuss your legal matters.
Thanks for reading.
Christopher E. Botti, Esq., Certified Specialist in Estate Planning, Trust and Probate Law