The longer you live, the better the odds become that you will need long-term care (LTC). If you failed to plan for the cost of that care, your entire retirement nest egg could be at risk. Counting on Medicare or your basic health insurance for help is not a viable option as neither will cover LTC as a general rule. As you may be aware, purchasing a separate long-term care insurance policy is one way to plan for the high cost of LTC; however, is it the best option? To answer that question, the Beverly elder law attorneys at DeBruyckere Law Offices explain the ins and outs of long-term care insurance.
Why Would I Need LTC Insurance?
When you reach retirement age, you will already stand a 50 percent chance of needing LTC at some point down the road. With every passing year, those odds increase. At an average yearly cost of over $100,000 in the New Jersey, and an average length of stay of 2.5 years, a LTC bill could easily run over a quarter of a million dollars. The cost of LTC alone isn’t the problem though. The problem is that Medicare only covers LTC expenses under very limited circumstances and basic health insurance policies won’t cover LTC expenses at all. Therefore, unless you can afford to pay for those expenses out of pocket, you need a plan.
What Is Long-Term Care Insurance?
As the name implies, long-term care insurance is health insurance that is specifically designed to cover the costs involved in long-term care. Although it sounds straightforward enough, LTC insurance can be very complicated – and costly. In fact, people frequently purchase a LTC policy without truly understanding what the policy covers, when coverage begins, and/or how long coverage lasts.
Understanding LTC Insurance
Incorporating a LTC insurance policy into your overall estate plan may, indeed, be a good idea; however, you need to make sure you are clear about the benefits offered by that policy before you commit to purchasing it. To begin with, you need to be clear on what the policy covers. For example, a LTC insurance policy may cover any, or all, of the following:
- Nursing home care
- Home health care
- Respite care
- Hospice care
- Personal care in your home
- Services in assisted living facilities
- Services in adult day care centers
- Services in other community facilities
You also need to make sure you know what the policy does not cover. For example, most LTC policies will not cover:
- A mental or nervous disorder or disease, other than Alzheimer’s disease or other dementia.
- Alcohol or drug addiction.
- Illness or injury caused by an act of war.
- Treatment in a government facility or that the government has already paid for.
- Attempted suicide or intentionally self-inflicted injuries.
- Care or services outside of the United States
The next thing you need to know is when your policy will kick in and start covering your LTC expenses. Most LTC insurance imposes a waiting period before benefits will start. For example, your policy might require you to be in a LTC facility for 100 days before benefits begin. Of equal importance are any policy limits. This may refer to a maximum benefit amount and/or a maximum number of days that are covered.
Finally, you also need to know how your LTC policy fits into your overall financial and tax planning endeavors. Specifically, you need to know if your plan is federally tax-qualified or not. A tax-qualified policy, or a qualified policy, offers certain federal income tax advantages. If you itemize your income tax deductions you may be able to deduct part, or all, of the premium you pay for a qualified policy. You can deduct total medical expenses, including your long-term care insurance premium, that are greater than 7.5% of your adjusted gross income.
Contact Beverly Elder Law Attorneys
If you have additional questions or concerns relating to long-term care insurance, or you wish to discuss planning for the cost of long-term care in your estate plan, contact the experienced Massachusetts elder law attorneys at DeBruyckere Law Offices by calling (978) 969-0331 to schedule an appointment.
Daniel DeBruyckere
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