If you needed nursing home care tomorrow, could you afford the $13,000 to $15,000 a month median monthly costs? For many people, it would be impossible to pay that much.

Long-term care insurance (LTCI) helps close that gap. Here's how it covers costs and fits into your estate plan.

What Long-Term Care Insurance Policies Are and How They Work

LTCI may reduce the amount of savings and other assets you spend on long-term care, but it might not remove the need for other planning. A policy may limit:

• The daily or monthly benefit amount
• The total benefit pool or benefit period
• The care settings and providers that qualify
• Whether it offers inflation protection
• The elimination period (the number of days you must pay for care) before benefits begin
• Whether it reimburses expenses or pays a fixed indemnity amount

Coverage amounts may also vary by care setting, with some policies paying less for home or assisted-living care than for nursing home care.
For couples, policy payouts for one spouse can reduce the risk of draining the other spouse's resources.

How Medicare and MaineCare Help Pay for Long-Term Care 

• Medicare: Generally, Medicare covers limited skilled nursing or home-health services only when strict medical and coverage requirements are met; it's not a long-term custodial-care plan.
• MaineCare: MaineCare may cover qualifying long-term care services for eligible people, but financial and medical eligibility rules apply. LTCI can help pay for covered care while someone is paying out of pocket. MaineCare eligibility has separate financial and medical rules, including for asset transfers. Before making major gifts, transfers, or care-financing decisions, speak with an elder law attorney.

The Maine Long-Term Care Partnership Program offers dollar-for-dollar asset protection. For example, if a qualifying Partnership policy pays $50,000 in benefits, MaineCare can disregard up to $50,000 in assets in determining eligibility. That same amount of assets may also be protected from MaineCare estate recovery. 

What Are the Biggest Drawbacks of Long-Term Care Insurance?

As the cost of long-term care continues to rise, for many reasons, insurance premiums do, too.

If you never use the policy, there might be no death benefit for your heirs.

Hybrid policies combine life insurance or an annuity with long-term care coverage. Even if you don't use long-term care benefits, under a hybrid linked-benefit policy, your loved ones may receive a remaining death benefit or another payout. Annuity/LTCI products differ and may instead provide enhanced withdrawals or remaining annuity value rather than a life insurance death benefit. Fees, guarantees, tax treatment, surrender values, and benefits vary, so compare contracts.

It may be worth shopping around and buying LTCI while you're relatively young and healthy. Younger buyers generally pay lower initial premiums. Insurers may also decline applicants who don't meet their underwriting guidelines. Waiting until health problems develop may mean you're left with fewer options. 

Claims can require substantial documentation, including care plans, provider records, and proof the policy's benefit triggers have been met. Before buying, ask about how claims are submitted, the records required, how any "elimination period" works, and how the insurer assesses eligibility.

What to Consider When Evaluating Long-Term Care Insurance 

Your current age, health, and financial status are among the factors that affect the coverage you choose. Others include:

• Your income, savings, retirement assets, and family responsibilities
• Whether you could self-fund years of care without jeopardizing a spouse's financial security
• The importance of preserving a home or other major assets
• Your family health history and care preferences
• Your ability and willingness to keep paying premiums over time
• Whether an employer group benefit, traditional policy, linked-benefit/life-insurance product, or self-funding strategy is more suitable than LTCI

Supporting Your Long-Term Care Policy in Your Estate Plan
 
A durable financial power of attorney (POA) and other planning tools help ensure that if you become incapacitated, a named agent has authority to file insurance claims, manage policy records, and talk to insurers. Your policy, POA, health-care documents, and care instructions should also work together so someone can act on your behalf.

It's also important to understand what triggers benefits under your policy, such as severe cognitive impairment or the need for help with two or more activities of daily living. LTCI policies may also have certain in-home care and family caregiver rules that affect reimbursement. 

Building a Long-Term Care Plan

Long-term care planning works best when your insurance, financial, and estate planning decisions support one another.

A licensed financial advisor or insurance specialist can assist in choosing a policy and understanding premiums. An elder law attorney may review your estate plan and address issues like asset protection, incapacity, and MaineCare eligibility. Considering your insurance and estate plan together can help identify gaps before the need for long-term care.

To start organizing your long-term care plans, contact us online or call (207) 377-6966.