The question of whether to buy LTC insurance should be based on the same reason other types of insurance are purchased “exposure to loss.” We buy fire insurance in case our home is damaged by fire, auto insurance is a totally understood need and of course the need for life insurance is fully comprehended.Why would we even hesitate about the purchase of Long Term Care Insurance? What really is at risk in the event of needing financial protection? In a few words… everything you own is what is at risk. In the event of a nursing home stay the cost is firstly born by the ill person. At risk could be all assets including your home. The question is LTC insurance protection for everyone and the answer is no, long term care insurance policy is not for everyone. For a portion of the population, a long term care policy makes sense as an affordable and worthwhile form of insurance. Buying long-term coverage should not cause financial hardship to the family and should be based on an overall examination of your assets.The rules governing financial responsibility of LTC expenses are based on the ability to pay and the assets available to be used for the care. Married couples generally can protect their home along with a certain amount to other assets. The amount of these assets varies based upon the state of residence of the couple. Some states allow as much as $100,000 in assets other than the residence to be exempt and other have a lesser amount.In almost all situations involving a single person, all assets are exposed to the cost of a nursing home stay. Once again each state may have its own set of rules and it is important to be aware of those limitations.It is impossible to predict who will need LTC, but past studies point out the likelihood of needing such care at 38% of those over age 65. These figures can be slightly misleading because it deals with entering and using a nursing home facility and often times it could be for a recover from surgery or just a short stay. The real numbers of who will need LTC for a period longer than 180 days is about 8%.In making a decision on whether to purchase LTC insurance should always be based on the assets available and how a well spouse’s life may be affected by the loss of any or all of those assets. Like all important life decisions it is important to use great caution and to make certain the need for the policy fits your specific situation. It is always important to get a second opinion and one from a source other than the insurance agent.
In the early 1980′s Medicare started using a system called the diagnosed related group of guidelines for advance payments to hospitals. This has really given hospitals authority and incentive to discharge patients very soon after admission to the hospital.The hospital gets paid the same whether the patient is in 3 days or 6 days. So the hospital can make more money if they free up the bed space for the next patient. The problem this has caused is that nursing homes have become the recovery place for these patients that were not ready to go back to their homes. The problem with this is that Medicare only pays up to 21 days of skilled nursing care. Therefore, if a patient is not recovered after the 21 days in the nursing home, then the funds come out of the patients estate, provided they have one. Needless to say, it does not take long to eat up one’s estate at the nursing home rates.Insurance companies have just in the last decade recognized this problem and now are offering Long Term Care Insurance. The long term insurance rates vary by geological location, as well as state and local regulations. The premiums are costly, however, a person has to weigh out the advantages and disadvantages to purchasing long term care insurance.Many people assume that their healthcare provider will cover long term care. Unfortunately Health care insurance covers medical bills, hospital bills and some prescriptions. They do not cover nursing home expenses. The same rule applies for Medicare. Medicare will pay for skilled nursing home care only for patients that are able to fully recover from their injuries or illnesses. Then the myth is that a person can always fall back on Medicaid, but Medicaid is for the people who fall under the low income guidelines and have little or no assets.If a person can afford long term care insurance, it is highly recommended that they purchase it when they are young, as the rates are substantially lower.