A common misconception is that Medicare will cover your long-term care if the need ever arrives for you. Unfortunately, Medicare was never intended to cover long term care needs and people have to have a plan in place for this need.
Nursing homes started to provide long term care to individuals in the 1960s and long-term care insurance started to be offered in the late 1970s. These early policies had premiums paid on a monthly basis for a benefit that one hoped to never need.
Within a few years, it became clear that insurance companies had grossly underestimated the number of claims that would be filed and how much of an increase there would be in health care costs over time, and multiple insurers were unable to pay their claims. Long term care insurance policies transitioned from traditional stand-alone polices to a combination or hybrid model that utilized life insurance with a longterm care rider.
Multiple policy designs exist that allows the consumer to select a policy that meets their individual needs. Retur
of premium riders exist that will pay a death benefit to a beneficiary if the insured dies when benefits received under
the policy are less than the premiums paid to the insurer. The benefit is equal to the excess of premiums paid over benefits received.
There are policies that have a reimbursement of expense feature that will reimburse the policy holder for expenses
up to the coverage amount of the policy, or an indemnity payment which will pay a fixed dollar amount each month no matter how much actual expenses are incurred
Long term care insurance can cover home care, adult daycare, assisted living, respite care, hospice care, nursing home care as well as home modifications to accommodate disabilities. Benefits are payable when an insured is unable to perform two of the six activities of daily living, which are bathing, dressing, eating, transferring, toileting and continence. How long benefits are paid and policy waiting periods vary and may be selected at policy inception or in
some cases at the time a claim is made.
Long term care costs can create a severe drain on one’s resources and while not everyone needs to have long term care insurance, everyone needs to have a plan in place on how you will handle an event should it occur. Meeting with a financial advisor to evaluate your unique situation and assisting you in a policy design and selection that fits your needs is a recommended course of action for a prudent person in the design of their estate plan.
The above is the opinion of the author and should not be relied upon as investment or legal advice or a forecast of the future. It is not a recommendation, offer, or solicitation to buy or sell any securities or any investment strategy. It is for informational purposes only. The above statistics, data, anecdotes, and opinions are assumed to be true and accurate. Grand Canyon Wealth Management does not warrant the accuracy of any of these.
Michael J. Day, CPA, PFS™ is the founder of Grand Canyon Wealth Management, where he provides financial planning, estate planning, wealth management, and investment services. For more information, or to schedule a complimentary consultation, visit grandcanyonwealthmanagement.com, call (480) 590-3590 or e-mail Michael.j.day@lpl.com. You may also follow him on Twitter @GrandCanyonWM. Securities and advisory services provided through LPL Financial, a registered investment advisor member FINRA/SIPC. Grand Canyon Wealth Management is not an affiliate company of LPL.