The high costs of healthcare can quickly deplete a lifetime of assets and place undue burdens on you and your loved ones. Health insurance is essential to avoiding this problem. However, health insurance does not cover all care. In such cases, the expenses would fall on you or you family. Long-term care (LTC) and life insurance plans are financial tools designed to protect you and your family from different types of risks as you age. While LTC insurance is primarily about protecting your retirement savings and maintaining control over your care, life insurance insurance is designed to provide financial security for your loved ones or your business after you pass away. Let’s talk about how Brackett Insurance Consultants can help you plan for your LTC and life insurance needs.
What is long-term care insurance (LTC)?
Long-term care (LTC) insurance is a private insurance policy designed to cover the costs of services that help you with basic daily tasks over an extended period. These services, which are typically not covered by standard health insurance or Medicare, become necessary when you can no longer care for yourself due to aging, chronic illness, or disability. Your premiums secure a pool of money (e.g., $200/day for 3 years) for your use when the plan is triggered. Policies typically pay for care in various settings, including your own home, assisted living facilities, or nursing homes.
What circumstances trigger an LTC plan and what does it cover?
Benefits are usually triggered when a licensed professional certifies you cannot perform at least two of six basic tasks on your own: bathing and dressing, eating and toileting, transferring (moving in/out of bed or a chair), and continence (managing bladder/bowel functions). LTC insurance helps pay for the cost of assistance with “activities of daily living” (ADLs) such as bathing, dressing, eating, and mobility. Standard health insurance and Medicare typically do not cover these costs.
What is the “elimination period?”
The elimination period in LTC insurance is the waiting period that must pass before the insurance company begins paying for covered services. Most policies allow you to choose an elimination period at the time of purchase. Common options include 0-365 days. Most people select 90 days as a balance between premium cost and financial risk.
Why should I get a long-term care plan?
The biggest reason to buy LTC insurance is the high cost of the care that most health insurance plans and Medicare do not cover. For example, consider the median annual costs in Illinois for Assisted Living ($6,191/month), Nursing Home Semi-Private ($8,145/month), and full time Home Health Aide ($80,080).
LTC insurance will also support your continued independence and ability to choose your care by allowing you to stay in assisted living or your own home, reducing yours family’s financial, physical and emotional burden, and preventing you from having to “spend down” your savings and sell your home to pay for care under Medicaid rules.
Don’t Medicare and Medicaid pay for long-term care?
Many people mistakenly assume government programs will pay for their long-term care. However, Medicare only pays for short-term skilled nursing (rehab) for up to 100 days. It does not cover “custodial care” (i.e., help with bathing, dressing, etc.). Medicaid requires you to spend down your assets in order to qualify. Usually this means having less than $2,000 in countable assets. That said, Illinois participates in the Long-Term Care Partnership Program. If you buy a “partnership-qualified” policy and use all its benefits, you can qualify for Medicaid while protecting an equivalent amount of assets. For example, if your policy pays out $200,000, you can keep $200,000 above the normal Medicaid asset limit and still qualify.
I am young and feel healthy. At what age should I purchase long-term care insurance?
The best time to purchase a LTC plan is typically between ages 55 and 65. This allows you to avoid higher premiums and potential medical denials.
What is the purpose of life insurance?
The most common reason to buy life insurance is to replace your income so that those who rely on you (children, spouses, or aging parents) can maintain their standard of living. Life insurance allows you to be sure that the things you have planned to give your family (e.g., college for kids, mortgage and other debts paid off) will happen even if you are not there to see them.
Do I need to have life insurance?
How much life insurance you need depends on the number and types of financial obligations you have. Examples include: parents with minor children, caregivers for aging parents, homeowners with a mortgage, couples who share bills, rent, or a lifestyle that requires both incomes, and people with debt. Business Owners can also use life insurance to fund a “buy-sell agreement” so partners can buy out your share rather than working with your heirs.
How much life insurance do I need to get?
A good rule of thumb is to have 10 to 15 times your annual gross salary or 10x your salary plus $100k per child for college.
Are the benefits of my life insurance policy taxed for my beneficiaries?
Death benefits are generally not subject to federal income tax for your beneficiaries.
What kinds of life insurance are available to me?
Term Life provides coverage for a set period (10–30 years) and is generally more affordable. This type of life insurance is useful for short term needs like college planning or mortgage payoff.
Unlike term life, which expires after a set number of years, Permanent (Whole/Universal) Life whole life lasts indefinitely. Your payments are “locked in” and guaranteed never to increase, regardless of changes in your age or health.
A portion of each premium is funneled into a tax-deferred savings account that grows at a guaranteed minimum rate. When you pass away, your beneficiaries receive a tax-free lump sum that is guaranteed not to decrease.
Can I combine my LTC and life insurance into one plan?
Hybrid plans combine long-term care (LTC) protection with a life insurance policy or an annuity. They are designed to solve the “use-it-or-lose-it” problem of traditional LTC insurance. If you never need long-term care, the hybrid policy pays out a death benefit to your heirs.
hybrid plans are typically fund these with a single lump sum or fixed payments over a short period (e.g., 5 or 10 years). If you need care, you “accelerate” or tap into the policy’s value to pay for it. If you don’t, the full value remains for your beneficiaries.
Unlike traditional LTC insurance, which can have unpredictable rate hikes, hybrid premiums are generally guaranteed never to increase.
