MN Estate Planning: A Basic Overview of Long-Term Care Insurance

While most of us feel were doing well just keeping up with our life insurance policy premiums, the fact is that once you reach your early 50s, everyone needs to make a decision about possibly buying long term care insurance, too. After all, its been estimated that some 70% of those over age 65 will require some form of long-term care before they die, but only about 20 percent own a policy.

At this point, you may be asking: Exactly what is long term care insurance (LTC)?

A Government Definition for LTC and the Factors Affecting Its Cost

According to one website, Long-term care insurance is designed to cover long-term services and supports, including personal and custodial care in a variety of settings such as your home, a community organization, or other facility.

When you apply to one of the approximately 14 companies that still sell this type of insurance today (down from roughly 100 only about one decade ago), youll be evaluated based upon your age, overall health status, whether or not you want to pay extra money for protection against inflation, and the maximum number of days your policy will cover. Many other factors may also come into play and are best explained by your fully licensed LTC insurance sales agent.

Positive Aspects of Obtaining a Standard or Hybrid Long Term Care Insurance Policy

Better chance of leaving money to your heirs. This type of purchase can significantly increase the chances that youll be able to leave a sizeable amount of your wealth and possessions to your heirs (assuming your estate is worth well over $500,000);
You can create a more stable or predictable estate plan than someone without such a policy. Youll be in a better position than most seniors when it comes to creating a secure form of an estate plan, based upon the added financial security an LTC policy can offer;
Cost savings available when you and your spouse buy together. If you and your spouse buy LTC policies together, you can save up to 30% over buying them separately or at different times. Plus, this type of purchase makes it easier to arrange for special riders that allow you and your spouse to share your combined benefits;
Hybrid LTC policies have their own special features and drawbacks. Should you decide that a hybrid long-term care insurance policy is best for your financial situation it can offer the special blessing of often paying out a death benefit to your survivors once you pass away. That same type of benefit is not paid to those who purchase a standard LTC policy.

Request Plenty of Advice So You Can Avoid Common Long Term Care Purchase Pitfalls

Try to buy a LTC policy in your forties or fifties. When you postpone this decision, your premiums can greatly escalate and you significantly increase your chances of being turned down for coverage. In 2014, about 45 percent of the people who applied for LTC insurance were turned down because they were 70 years of age or older. Of course, be sure to buy from a company that appears to be in excellent financial condition and has been in business for many decades. You need a company that will still be around and solvent when you need to start receiving your benefits, many years from now;
Be aware than annual premiums can easily cost you $3,000. Of course, your current age and health status, coupled with any desire for special coverage riders and exclusions can cause this amount to rise even higher;
Try to do whatever you can to avoid letting an LTC policy lapse. Although experts disagree as to how many people annually let such coverage lapse, if youre been buying a standard LTC policy and stop making premium payments you will never be able to recoup any of your investment;
Stay abreast of all current fees for semiprivate and private LTC expenses. A recent Genworth study indicated that a semiprivate nursing home room now often costs about $80,000 a year and a private one can cost $90,000 or higher;
Be aware that new purchasers can no longer obtain lifetime coverage. In other words, your coverage may only be good for three to five years depending upon what you can afford;
Keep in mind that about of those in their sixties will be turned down for LTC. Also, if you fall in this age range or are older if youre provided with a policy, youre very likely to be charged 40% (or higher) if your health is unusually poor;
Ask what special riders, exemptions or exclusions might benefit you personally. Be sure your fully licensed LTC agent understands your complete financial status;
Request a listing of the Top 10 points in your contract signed by your agent. This information should include when you can first start receiving benefits, whether any period of exclusion may be involved, and other critical factors. Ask your agent to personally sign and date this summary when providing it to you. If your agent refuses to provide such a simplified listing or summary of benefits see if you can find someone else who is more than willing to accommodate you. Also, always check on the status of your insurance agents license in your state before purchasing anything. Only buy from an agent with a stellar reputation preferably someone who was recommended to you by another, previous purchaser of LTC insurance.

It may be well worth the expense of asking your financial planner to meet with you, your Minnesota estate planning attorney and your insurance sales agent (all during one meeting) — to be sure everyone is making the best possible suggestions to you. Of course, as briefly referenced at the beginning of this article — you should request special advice from your MN lawyer about the advisability of purchasing any long term care insuranceif your overall estate is worth less than $500,000.