There is a gap in coverage for medical care. Medicare will pay for most of your medical expenses as you grow old, especially if you purchase a Medicare supplemental insurance policy that can handle copayments and even prescription drug purchases. Medi-Cal is available for long term nursing home care, and can usually be obtained when needed with a bit of Medi-Cal planning.
The coverage gap is for people who need assistance and supervision with the activities of daily living, but who aren’t so poorly off as to require nursing home care. Regretfully, some nursing home patients fall into this category, because they can’t afford to pay for assisted living, board and care homes or in-home caregivers that would provide them with more comfort and freedom.
While there are some programs that help pay for in-home care, such as In Home Supportive Services and the Veteran’s Administration Aid & Attendance program, most people who need care giving short of being in a nursing home have to pay for it on their own dime.
There is an alternative. Long term care insurance has been available for years. There are restrictions of course. They won’t let you buy a policy when you already need care, so you have to do it sooner rather than later. You also have to be particularly careful about the terms of the policy. You also want to make sure that the insurance will pay for care in your own home. After all, that’s the goal.
The good news is that there is an alternative to traditional long term care insurance policies where you may receive no benefit at all unless you actually receive long term care. There are now insurance companies selling life insurance with a long term care rider. The financial advantage of such a policy is that if you don’t actually need to use the long term care insurance, your family will still be able to collect on the life insurance upon your death.
If you have an existing life insurance policy, you can cash it in and buy a new policy with the long term care rider in a Internal Revenue Code section 1035 tax free exchange. There is also now a means by which you can use retirement account money in an IRA to buy this sort of insurance.
We have seen a case in which a person sold his $250,000 insurance policy in exchange for a $250,000 policy with a long term rider. When he took ill, the insurance paid out $10,000 a month for five months for care in his own home, and his family inherited the remaining $200,000 upon his death.
Long term care insurance isn’t for everyone, and people have shied away from it due to its cost. However, the opportunity to invest in life insurance with a guaranteed payout and long term care coverage can make providing for caregivers much more affordable.
Len & Rosie