On a regular basis, clients ask my opinion on Long Term Care Insurance (“LTCI”). When clients ask, I begin by saying that as an elder law attorney, I’m not typically involved in a client’s life at the time when considering LTCI is a financially viable option. Rather, my involvement with the product is almost always when a client is under claim or about to file a claim. Since every family’s situation is different and I am not a financial professional, I often refer clients interested in LTCI to financial advisors and insurance advisors who specialize in this product. However, I will speak to what my experiences with LTCI have taught me.
LTCI is a relatively new insurance product protecting the insured from long term care expenses. Similar to health and/or car insurance, traditional LTCI policy premiums are not reimbursed if the insured never files a claim. For example like car insurance, the insured pays into the insurance policy for 20 years and then suddenly died in their sleep, the insured’s beneficiaries do not receive any proceeds from the policy. Although most individuals do not think twice about this in regard to car insurance, many individuals do find this hard to stomach when it comes to insurance for long term care. I believe the reason for this difference in opinion is that individuals believe it more likely they will have a car accident than a long term care crisis despite statistics showing otherwise. As an alternative to traditional LTCI, certain insurance carriers offer policies with an upfront lump sum premium that include a LTC benefit as well as a death benefit. This characteristic makes the LTCI similar to a life insurance policy that pays out a death benefit, should the insured never file a claim during his or her lifetime. On the other hand, there are carriers that offer both term and permanent Life Insurance products which allow the insured to access living benefits when they require assistance with 2 or more activities of daily living. It will be intriguing to see how the LTCI marketplace changes over the next 20 years as they attempt to meet the growing need of the agiing baby boomer population with more flexible LTCI policies.
One of the more recent intiatives of the public and private sector happened in February 2008 when the Centers for Medicare and Medicaid Services (“CMS”) approved the New Jersey Long Term Care Partnership program. This program allows an individual to protect assets equal to the insurance benefits received from a Partnership Policy so long as the policy meets certain requirements. As a result, the federal and state governments are taking a step to encourage individuals to plan for themselves rather than relying solely on the government for their care.
From my experience, planning for an individual who has LTCI allows for greater flexibility and more opportunities to ensure he or she receives the best possible care and minimizes the risk that the individual and his or her spouse will become impoverished in the process. Please note that everything in this blog is my opinion, not legal advice, and you should consult with your financial advisor and insurance advisor to determine if LTCI is right for you.