When we meet with clients to discuss options for funding long-term care that helps to preserve assets for a surviving spouse or to leave a legacy to the next generation, we hear a lot of complaints about traditional long-term care insurance. What we mean by “traditional” is that the policy insures against future long-term care expenses, requires an annual premium, does not have any cash value or death benefit and premiums can increase in the future.
Traditional long-term care functions in the same manner as homeowner’s insurance. You pay your premiums annually and if you have a claim, you file it. If you never have a claim, you never collect anything from the policy. The amount you pay in premiums changes each year as the policy is renewed.
For traditional long-term care insurance operating in that same manner, you must qualify for the coverage. This means at the time you apply, you are in reasonably good health without any disqualifying pre-existing conditions. If you fail to pay your premium, the policy will lapse and you will no longer be able seek these benefits.
To trigger the benefits available under the traditional policy, you must provide a doctor’s note that says you need assistance with 2 or more activities of daily living (ADLs). The 6 commonly recognized ADLs are toileting, bathing, dressing, eating, transferring from one piece of furniture to another and continence. You must read your policy terms very carefully to understand your allowable benefits based on the types of care. Some policies pay the same amount whether the money is used for in-home care, assisted living or nursing home care, but some do not. Some may only pay 50% of in-home care. It is important to understand your policy terms prior to making these care arrangements.
Top 5 Complaints We Hear Our Clients Express About Traditional Long-Term Care Policies
1. Many clients find they do not qualify due to health issues and/or pre-existing conditions.
2. Clients do not like the ‘use it or lose it’ functionality of these policies. If you pay expensive premiums for years and never end up needing the long-term care benefits, that money is not returned (*unless you purchase a return of premium rider).
3. There is no cash value or death benefit to the policy.
4. The daily benefits were not adjusted for inflation and by the time the benefits are triggered the amount given is not enough to cover the costs of the care (*unless you purchase an inflation rider).
5. The biggest complaint by far is the expense of the premiums. Clients who sign up in their 60s and pay for a decade often find that when they reach their 70s, the premium increase is too high to continue the coverage.
Fortunately, there are alternatives to traditional long-term care insurance policies. Contact the knowledgeable elder law attorneys at Stouffer Legal to learn about more options. You can schedule an appointment by calling us at (443) 470-3599 or emailing us at office@stoufferlegal.com.
