Some people think that when they get older and they have to go into an assisted living or nursing home facility, they will just be covered by Medicare or their regular health insurance.
Medicare doesn’t cover much of assisted living or nursing home stays. Your stay could be covered by Medicaid, which is for lower-income individuals. You cannot have more than $2,000 in assets in order to qualify for Medicaid. The government CHECKS your income for the previous 5 years, so you can’t give away all your money and assets to a family member.
If you know me personally, you’ll know I’m pretty blunt, so I’m just going to say this now. I don’t want to go into a Medicaid facility when I’m older, and I hope no one I know does either. There are no five-star reviews.
You may have enough money to do what we call “self-insure.” That is when you pay for the assisted living facility, nursing home, or adult day care center of your choice directly. Or you pay a caregiver to take care of you at your home.
If you do have to enter a care facility, it may cost you thousands of dollars per year. If you have $100k in savings, it could be depleted within a year. You may want your assets to pay for different things, and in that case, you can consider long-term care insurance (LTC Insurance). LTC Insurance pays for stays at assisted living or may pay for a caregiver to come to your home.
You cannot wait until you have a need to buy LTC insurance. You have to buy it first, and hope you never have to use it. It’s like how you have to buy homeowner’s insurance. You hope you never need to use it, and it’s frustrating to pay all that money per year to NOT use it, but if you do need it, you’re really glad to have it.
Also, if you wait too long to purchase LTC insurance, it will become really expensive. The best time to look at buying a policy is when you are in your mid-50s to mid-60s.
Just like with disability insurance, there is a waiting period, where you’ll need to pay out-of-pocket for a period of time, until the LTC insurance kicks in.
You qualify to use LTC insurance when you are no longer able to do at least 2 of the following 6 activities for daily living on your own.
- Caring for incontinence
- Transferring (getting in or out of bed or a chair)
One benefit of buying LTC insurance is that you may be able to deduct some of the premium payments as medical expenses (if you qualify for itemizing your tax deductions and if your medical expenses exceed 7.5% of your Adjusted Gross Income).
This is just one way to purchase LTC insurance; there are other ways to get a policy as well. LTC insurance can be a way to preserve your assets and savings and maintain your independence from family and friends (you won’t need to have them help you get dressed, etc.). As always, if you have questions, please do not hesitate to contact me!
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