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INTRODUCTION – Which type of policy is right for you?
There are five types of insurance policies that can help you prepare for long-term care. The five types are:
1) Long-term care insurance,
2) Long-term care partnership policies,
3) Linked-benefit life Insurance
4) Linked-benefit annuities, and
5) Recovery care policies.
In this short e-book, we’ll explain some important aspects of each type of policy as well as some advantages and disadvantages of each. Which policy is right for you will depend upon: your age, health, and financial situation. We provide you with a simple worksheet to help you decide which of these is right for you.
SOME IMPORTANT BASICS FIRST
Long-term care is NOT nursing home care (usually)
Most people when they hear the term “long-term care” think of nursing homes. However, most people who need long-term care are not in nursing homes.
Long-term care is when your health is compromised and you need assistance with basic daily activities, like bathing and dressing. This is called “personal care” or “custodial care”.
Most people who need long-term care don’t need to be in nursing homes. For every four people in a nursing home there are over twenty-eight people receiving care at home.
Just because someone is receiving assistance every day doesn’t mean their life is miserable. Have you flown in a plane recently? Do you see all those people at the airport who “pre-board”? Their health is compromised. They need assistance with basic daily activities. They are still enjoying life. Many people who need “long-term care” still lead a full life.
Long-term care is NOT medical care.
Medical care is provided by doctors, nurses, physical therapists, respiratory therapists, etc… Medical care helps you recover from an illness or an injury.
Long-term care is primarily provided by aides. When your health is compromised, you may need assistance with basic daily activities like: bathing, dressing, getting in and out of bed, eating, or help with toileting.
Because long-term care is not medical care, it’s not covered by medical insurance or Medicare.
What’s the difference between Medicare and Medicaid?
Medicare is the federal program that provides medical care for those age 65 and older. Because long-term care is NOT medical care, Medicare does NOT pay for it. Medicare can pay for part of the first 100 days of care in a nursing home, but no more. Medicare pays for rehabilitative care (i.e. care that helps you get better). Medicare does not pay for ongoing assistance with daily activities.
Medicaid is the health care program for the poorest Americans regardless of their age. Medicaid does pay for long-term care IF….
Who pays for long-term care?
There are three (actually four) main ways to pay for long-term care: your savings and income, long-term care insurance, and Medicaid. (We’ll explain the fourth way later). Medicare does NOT pay for long-term care.
Medicaid pays for long-term care if…(it’s a BIG IF)
Medicaid DOES pay for long-term care, but not everyone can qualify for Medicaid. If your savings or income are above certain levels, you can’t qualify for Medicaid. If you don’t qualify for Medicaid, you have to use your savings and income to pay for your long-term care until you’ve spent your savings to a level low enough to qualify for Medicaid.
There’s a fourth way to pay for long-term care and it’s “free”, sort of.
Millions of people provide elder care for family members “for free”. It’s not really free. The caregivers pay the cost in many ways: physically, emotionally, and financially. Adult children who provide personal care to a parent have higher stress levels, miss work, pass on promotions, often develop their own health problems, and suffer lost wages and benefits. AARP estimates that nearly 40,000,000 Americans provide “free” elder care to a relative an average of 77 hours per month.
To help avoid the stress placed on family members, many people plan ahead by owning some type of insurance policy that can help them pay for their long-term care.
Your Situation Is Unique
Your situation is unique. Your finances, your health, your family and friends, and your goals are unique. That’s why we don’t take a “one size fits all” approach to long-term care planning. To meet each of our client’s unique circumstances we research and compare all five types of insurance policies that can help pay for your long-term care.
Here is a brief summary of these five types of policies. Later on, in the book, we’ll provide you with more detailed information about each type of policy.
Long-Term Care Insurance
“Long-term care insurance” policies have changed significantly in the past 10 years. These policies now provide richer benefits for care at home, standardized benefit triggers, and larger benefit amounts. Today’s long-term care insurance policies can have as much as a million dollars of benefits. Since the older policies had such large rate increases, 41 states have passed strict pricing regulations to protect those who purchase long-term care insurance today.
Long-Term Care Partnership
“Long-term care Partnership” policies are special, government-approved policies that can help protect 100% of your assets from Medicaid even if your insurance policy runs out of benefits. These policies can be very affordable because you only have to buy an amount of insurance that is equal to the amount of assets you want to protect. For every dollar that your Partnership Policy pays in benefits, you can protect a dollar from Medicaid.
Linked-Benefit Life Insurance
“Linked-benefit life insurance” policies combine life insurance and long-term care insurance. These policies usually have guaranteed level premiums. If you never need long-term care these policies pay a death benefit to your beneficiary.
“Linked-benefit annuities” combine an annuity with long-term care insurance. If you never need long-term care your heirs inherit the value of the annuity.
“Recovery care” policies are usually half the cost of long-term care insurance. These policies are designed to pay for two years of care (or less).