Why Buy Long-Term Care Insurance?

past-dueRecently a friend of mine hosted a dinner party for six women, nowin their mid-sixties, who had previously been married. We get together once a month to play cards, go to the theater, or just sit around and have a grand old time. Currently, all the women are alone, either by choice or circumstance, and the subject of Long-Term Care Insurance came up for discussion.

Needless to say, the conversation became somewhat heated amongst the women. Nobody likes to think about losing their independence and having to rely on others for assistance. However, in a time of increasing life spans, uncertain economic realities, minimal increases in social security and low interest on investments, it’s a reality most of us will have to face. My friend, Laura, whosehusband is presently residing in an assisted living facility, said that for her, this type of insurance had become a necessity rather than a luxury. Why?

Laura’s husband is now in his third year of residence in a facility at a cost of approximately $42,000 a year just for room and board. Add to this his need for continuing medical and prescription care, and the result is that the couple’s financial resources are quickly being drained. During their marriage, Laura just assumed that the money they had saved would take them into their “Golden Years” with some left over as an inheritance for their children. However, that will not be the case if this goes on much longer and Laura can’t help thinking about what will happen to her if she, too, needs continuing medical care in or out of a facility at some point in her life. My other friend, Amy, a lovely person with a devil-may-care attitude and not interested in details, suggested that Laura apply for Medicaid for her husband’s on going care. As with most people unfamiliar with the rules, her thinking might not provide a realistic solution to the problem of a family’s dwindling financial resources.

To qualify for Medicaid in most states, a healthy partner is allowed to maintain a house, a car, and in New York, maximum assets of $115,920, which includes any Social Security payments as of 2013. This cap on assets can be much less in other states. In addition, if neither spouse resides in the family home, not only is there a cap on the value of the home, but a written document must be prepared stating that one of the spouses has an intent to return to the family home. When you accept Medicaid in exchange for ongoing care, upon the death of the last surviving spouse, the proceeds from the sale of the home belong to Medicaid. You cannot leave it to your children. Basically, Medicaid is a program for people who have exhausted all other resources and have no way to pay for ongoing medical or nursing care. It is not ever an effective means of protecting assets acquired over a lifetime of hard work and financial sacrifice.

Therefore, in planning for retirement, Long-Term Care insurance is just another means of protecting the hard-earned assets of a lifetime. If you are in the midst of planning for your future, we strongly suggest that you discuss your concerns with your agent. Knowledge, after all, is power and the lack of knowledge might just render you powerless at a time in your life when that is the last thing you need.

By: Karen Skoler, CPCU

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