Senior Care can be an expensive proposition. Studies have shown that 70% of people over the age of 65 will need some form of long term care in their lifetime—and 40% of those people will require care in a nursing home. Medicare will cover the first 100 days of rehabilitation care in a nursing home for a person discharged directly from a hospital. Medicaid is a means-based program which requires that applicants are below the poverty line to qualify.
A person on Medicare or Medicaid does not have much choice about care options. Assisted Living is not covered and neither are most forms of Homecare. To remain in control and able to choose the form and place one would receive senior care, it is necessary to be financially independent. When a person is “private pay”, it means they are using their own funds to pay for care instead of relying on tax payer funded government assistance.
One of the longest standing forms of private pay is long term care insurance. Policies covering future senior care needs have been sold since the 1970’s. There is a wide variety of policies available both for individuals and employees of companies. Typically, the younger and healthier a person is when they buy a policy, the more options they will have and the lower the premium payments will be.
In recent years, there has been growing use of converting life insurance policies into Long Term Care Benefit Plans. These Plans are not long term care insurance nor a policy loan. It is actually the sale of a life insurance policy, instead of lapse of surrender, to fund an irrevocable, FDIC-insured Benefit Account that protects the money and makes monthly, automatic payments directly to the care provider. The Benefit Plan is a Medicaid qualified spend-down that allows the owner to choose any form of senior care they want.
For the young making responsible plan for the future, adding a long term care insurance policy to your financial picture is a wise move. For people with an immediate need for care, converting an unneeded life insurance policy into a Long Term Care Benefit Plan make much more sense than abandoning a policy that has received premium payments for years.
In fact, both strategies work very well together. If a person is young and healthy enough to qualify for a long term care insurance policy they would not be a candidate for a Long Term Care Benefit Plan. If a person qualifies to convert their life insurance into a Long Term Care Benefit Plan, than they would not qualify to buy long term care insurance. And for those people that own long term care insurance and life insurance? They could use both of these options simultaneously. A person that desires additional senior care benefits beyond what is provided by their long term care insurance policy can convert a life policy into a Long Term Care Benefit Plan. The Benefit Plan will increase their monthly funds allowing them to add additional services, for example, such as home health aides in whatever setting they are receiving care, or to make home care related improvements such as building a ramp, purchasing a specialty bed or adding safety features to a bathroom.
In the world of senior care, it is best to have as many options and resources available as possible. The Long Term Care Benefit Plan and long term care insurance can be used together in a versatile fashion to fill in financial gaps and enhance care. One is ideal when planning for the future and one is ideal to address an immediate need for care. Those that can take advantage of each to pay for their senior care needs are benefiting from the best of both worlds.