Even if you have adequate medical insurance, you may still be a candidate for long term care (“LTC”) insurance. Long term care insurance has become increasingly popular as our population has aged.

Statistics show that the older we get, the greater the likelihood that we will experience an extended stay in a nursing home or require full time home health care. Traditional health insurance does not cover long term nursing home care.

Medicare covers a small portion of the cost of long term care for a stay of no more than one hundred days (see “Medicare” in Chapter Twelve).

The most important variables in any LTC policy are:

1. Daily Benefit Amount.
2. Length of coverage for any one nursing home stay.
3. Waiting (elimination) period.
4. Cost of living increases.
5. Number of “ADLs” (activities of daily living) included.
6. Premium cost.

Ideally, a LTC policy should cover the full daily cost (daily benefit amount) of your stay, and continue (length of coverage) for life. Naturally, if cost is a consideration, you may decide to cover a reasonable portion of the daily cost, and have coverage continue for a shorter period, say three years.

Three years of coverage tends to be popular for two reasons: first, the average nursing home stay is less than three years, and second, the Medicaid divestment period is thirty-six months (see Chapter Twelve: “Losing Independence” ).

The philosophy here is that you can give away (“divest”) all of your assets upon entering the nursing home and be eligible for Medicaid when your LTC policy runs out.

The longer the LTC waiting period (also known as the elimination period), the lower the premium cost. A ninety waiting period is common in part because Medicare covers a portion of the first one hundred days of your stay (if you are entering the nursing home from the hospital for a related condition).

LTC insurance may provide benefits long into the future. For that reason, it is extremely important that the daily benefit amount be indexed for inflation. You have two basic choices: either simple or compounded increases in your daily benefit amount. Although 5% simple increases are common, 5% compounded interest is better. Your selection will depend on your other resources and your premium tolerance.

The Activities of Daily Living usually include the following:

1. Bathing.
2. Toileting.
3. Continence.
4. Dressing.
5. Transferring.
6. Eating.

You are eligible for benefits under your LTC policy if you need substantial assistance with two or more ADLs, and your care is expected to last for at least 90 days, or, if you need supervisory assistance due to a cognitive loss such as Alzheimer’s or dementia.

Other important features and benefits to investigate while shopping for LTC insurance include:

1. Home health care benefits.
2. Intermediate and custodial care.
3. Waiver of premium.
4. Bed reservation.
5. Respite care.
6. Discounts for good health.
7. Guaranteed renew ability.

Fortunately, it is easier to compare LTC policies since they have become somewhat standardized. Nonetheless, it is prudent to obtain objective advice from a qualified professional, such as a financial planner with expertise in long term care planning. As always, check out the financial stability of the insurance company through rating services like Best’s, Moody’s, Standard & Poor’s and Weiss.

Long-term care premiums are income tax deductible to the extent that when added to other health care premiums and un-reimbursed medical expenses they exceed 7.5% of your adjusted gross income.

MEDICAID

If you have substantial liquid assets you may be in a position to self-insure your LTC needs. In the event you require nursing home care and do not have LTC insurance, you will be required to pay for your care out of your own pocket.

Medicare provides coverage for a portion of the first one hundred days of nursing home care if you enter the nursing home from the hospital in a related illness Only when your assets have been sufficiently depleted will you qualify for Medicaid.

Medicaid eligibility is discussed in greater detail in Chapter Thirteen. However, as a general rule you will be required to exhaust substantially all of your assets (other than your home and your car) before you qualify for Medicaid.

PLANES, TRAINS AND AUTOMOBILES

You should contact your property and casualty insurance agent and review your home and automobile coverage. Ask about an “umbrella” policy covering liability over and above your individual home and auto policies. Umbrella coverage is purchased in million dollar increments and tends to be a real bargain. You should sell your late spouse’s car (or turn it in to the leasing company). Don’t let family members use your cars or recreational vehicles and expose you to unnecessary liability.

CONCLUSION

First, attempt to locate all life insurance policies on your late spouse’s life. Then, begin the claims process as soon as possible in light of the fact that it may take 30 days to receive proceeds. Even though you may be offered a number of settlement options, the lump sum option will almost always be the best choice.

Life insurance proceeds should be integrated into a comprehensive financial plan discussed in Chapter Five. If you have dependent children, or other need for liquidity, you should purchase life insurance on your own life.

You should take immediate steps to protect yourself from any gap in health insurance coverage, and evaluate your need for long-term care insurance.

You should limit you exposure to property and casualty claims by securing adequate insurance including an umbrella policy.

Finally, you will need the assistance of a competent and trusted insurance professional to help you evaluate your insurance needs and the appropriate products.