Life insurance companies have become more competitive in recent years for policies issued on people over age 70. Good health is still a major consideration for low premiums, but policies have been redesigned to provide more death benefit and less cash value. Some term policies and certain universal life permanent policies are designed to provide a guaranteed death benefit up to age 95 with a guaranteed premium and no cash value at all. This design generally results in more death benefit for each premium dollar. Also, policies designed for couples — second-to-die policies — can provide a significant amount of insurance for a one-time single premium even if one of the partners is in very poor health.
An important concept to consider is that single premium life policies with no cash value and purchased for estate planning purposes, many years in advance of applying for Medicaid, can be a valuable planning tool if the need for Medicaid arises. Medicaid does not apply the death benefit of a life insurance policy to the asset spend down rule. But the cash value of any policy that has more than $1,500 in cash will count towards the asset test and could disqualify a Medicaid applicant. As an example, a person could have $1 million of life insurance with cash value less than $1,500 and it would not prevent that person from receiving Medicaid. However, cash value of more than $1,500 in this example will apply toward the asset test. It is important to know, for long term care planning purposes, that people who apply for Medicaid and then transfer assets to a life insurance policy, while they are going through spend down, could be in violation of their state’s Medicaid transfer rules and such an act may disqualify the applicant.
Life insurance can be used as an alternative for funding the cost of long term care. If someone planning for the eventuality of long term care is concerned about losing assets that would normally be passed on to the children or be needed by a surviving spouse, that person can invest a portion of those assets in life insurance and leverage a death benefit payout — sometimes for up to $3.00 in death benefit for every $1.00 in single premium. The death benefit is also income tax-free. A person creating such an estate can then use remaining assets for long term care needs in the future but still be assured that the children or a surviving spouse will receive an inheritance at death through the life insurance. And, as discussed above, if the money runs out and Medicaid has to start picking up the costs, a single premium life insurance policy with less than $1,500 cash value will not disqualify the applicant owning the policy
Another use for life insurance for the elderly is in paying the cost of final expenses such as funeral and burial. A number of companies will issue policies without any health questions for people who may not have very long to live. Most of these policies will provide little or no death benefit in the first two years after issue and so there is some risk, but most companies will also return the premiums paid if death occurs in the first two years.
Top financial professionals use this technique to reposition “safe money” to take care of a risk that is expected to happen to 70% of Americans – getting sick enough to need some help at some point in our lives.
Don’t wait to “Protect Your Wealth from Poor Health”. Take 2 minutes to watch this quick video on long term care planning.
Maybe at least once in your life you have wondered if and will Medicare pay for your long term care requirements. This maybe one of the biggest and most popular questions with regards to long term care planning and its processes and more often than not, the public hopes that the answer to this question is in their favor.
Some Americans may have the wrong idea or perception that Medicare can and will cover all their LTC requirements. This is why some of them tend to ignore and not consider buying any LTC policy from a private insurance provider or even those plan options created by the government. They think that through the help of Medicare, they can get and use all their needed LTC services in the future.
Sadly, this inkling may just give them even bigger concerns and problems once they realize that Medicare does not really shoulder and pay for some of the services and facilities that their medical situation might require. So they should not be complacent that the facilities and other services that they would need can be given to them even if they do not own an LTC policy.
So once again, we will try to give helpful and useful answers to the long-time dilemma of the public: Will Medicare pay for your long term care requirements?
Yes, there might be some LTC-related matters and concerns that the Medicare can satisfy and solve but these are really limited and it would be a good idea for the public to inquire first and know every detail of all the things that they have to be aware of about this.
Unlike what many individuals believe, Medicare does not support or shoulder indefinite or a lifetime worth of long term care. It does not lend financial assistance to those who need to be confined in nursing homes and other assisted living or adult day care facilities.
They can lend a hand and pay for a certain portion of the medical expenses incurred due to a short-term illness or injury but once the individual gets well, or if the limit or allotment is already consumed, then the Medicare coverage would be cut.
Long term care planning is very important for what will be a reality for most people. Options can include in-home nursing care and nursing home or other assisted living facilities.
The odds of needing long term care increase as you get older or weaker. Oftentimes, the need for long-term care help might be due to a terminal condition, illness, injury, disability or the infirmity of old age.
Long-term care involves various types of services designed to meet a person’s health or personal care needs. These services help people live as independently and safely as possible when they can no longer perform daily activities on their own.
About 10 million Americans need long-term care. Long-term care refers to the assistance and services provided to people who are limited in their ability or unable to perform basic activities, such as bathing or dressing, because of chronic illness or disabling conditions.
Most people with long-term care needs rely heavily on unpaid help from family and friends. Still, spending for long-term care services is substantial.
In 2002, national spending on long-term care totaled $180 billion, or about 12 percent of total health care (including medical and long-term care) expenditures. Nearly two-thirds of long-term care expenditures are for institutional care.
For individuals with extensive long-term care needs, long-term care services can be costly. In 2002, the average annual cost of nursing home care was $52,000 for a semi-private room and $61,000 for a private room. The average hourly rate for home care provided by a home health aide was $18.5 At this rate, four hours of home care daily would total about $26,000 annually.
Medicaid is the nation’s largest source of financing for long-term care, followed by out-of-pocket payments by the people receiving care and their families. Medicare and private health insurance provide limited coverage for nursing home and home health care. Few people make any long term care planning and have private long-term care insurance, although the number is growing.
Source: Fact Sheet
Costs for long term care insurance in 2012 have risen compared to the prior year and several insurers have filed for rate increases raising concern among consumers and consumer groups.
“No one likes to pay more so concern is understandable,” explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance, an industry trade group representing several thousand specialists who market LTC insurance. “But there is quite a bit of misinformation surrounding what’s taking place.”
To address the issue, the industry executive has been speaking with reporters, consumer representatives and making available association staff to discuss the matter with consumers. Slome appeared today on Martha Stewart’s radio network to explain what’s taking place.
“Historic low interest rates are the primary culprit and the Federal Reserve has indicated it plans to keep rates this low for the foreseeable future,” Slome notes. For every one-half percent drop in interest rates, a long term care insurance company needs a 15 percent premium hike to build up the needed capital to pay future anticipated claims.
Regarding the need for rate increases on existing long term care insurance policies, Slome explains it is never a take it or leave it proposition for the consumer. Insurers always offer an option by which the policyholder can continue to pay the same amount.
The Association executive points to a recent request for rate hike from a leading insurer. Policies affected are those offering a five percent automatic compound or simple inflation coverage, where benefits automatically increase by five percent each year for the life of the policy. “The company offers an option to reduce their future inflation percentage which allows people to avoid the rate increase altogether,” Slome says.
This is a prospective reduction in inflation; so all inflation additions previously applied to the policy will remain in place. “There is no reduction of their current benefit level,” Slome points out. “Only future inflation increases would be at a rate lower and the new inflation percentage offered as an option to customers will be in the range of 2.7% to 3.9%.”
Slome advises consumers with long term care insurance policies to speak with their agent regarding their concerns. “The protection is still incredibly important for people to have and valuable to those who need it,” Slome points out. “Last year, insurers paid over $6 billion in benefits to some 200,000 individuals who own long term care insurance. The largest open claim has surpassed $1.5 million and the policyholder paid less than $2,500 for their protection.” Some eight million Americans currently have some form long term care planning protection.
Based on some findings, 60% of the population will be needing some form of long term care sometime during their lifetime. Because of that, it is essential to prepare for the possibility of needing extended care in the future.
No other event can be as life-changing or devastating to an elderly’s financial security and lifestyle as needing long term care. It can alter, in so many degrees, the three main retirement dreams of elderly Americans:
1. Being independent
2. Being healthy and receiving enough health care
3. Having enough money for daily needs and not depleting financial assets
The sad reality is, majority of the American public undermines the importance of long term care planning and does not prepare for the devastating crisis of needing eldercare during their retirement years. This lack of planning can have a negative effect on the older person’s family, in relation to time, money and lifestyles. Worst of all, it can impact the family’s emotional health.
Due to the changing demographics and changes in government funding (i.e. Medicare), members of the baby boomer generation, without a doubt, need to plan for long term care before the elder years are upon them. Without the necessary preparation, you may end up in a financial disaster.