Plan today to ensure your care is covered
When long-term care insurance was introduced in the mid-1970s, its purpose was to cover the cost of nursing home care. Today, this type of insurance policy has the potential to cover not only nursing home care but also alternative care facilities, home health care and adult day care. As a result, the number of families taking advantage of long-term care insurance has increased and it has become a valuable piece of a farm family’s succession plan.
Kevin Spafford, Farm Journal succession planning expert, says long-term care insurance is designed to provide financial security, which is one of the basic elements of a comprehensive succession solution.
"We do long-term care analysis for every family during the succession planning process," he says. "We recommend coverage when appropriate, discuss alternatives to cover the cost and help families understand the ramifications of a long-term care need."
According to Spafford, one of the most common mistakes families make is not securing long-term care coverage.
"People want to deny the probability of needing care," he says. "They use every excuse possible to not engage in a discussion about long-term care."
Bridget Franzen, an adviser with Water Street Solutions, agrees. "Farmers think, ‘I’ve always been healthy, it’s not going to happen to me,’" she says. "If we’re young and healthy, it’s easy to assume it will stay that way."
As with any insurance, it’s important that the coverage level reflects reality. Consider what types of care the policy covers, what events trigger the benefits and whether the policy requires a hospital stay prior to providing benefits for a long-term care facility.
Once you determine what type of long-term coverage fits your situation, it’s time to figure out the coverage amount. Spafford recommends calculating the potential cost of care in your area to ensure the policy has enough coverage. Determine if the policy has inflation protection and a guaranteed insurability rider, which will allow you to increase coverage without proof of health.
Families should also consider if the policy is guaranteed renewable, meaning that it cannot be cancelled as long as premiums are paid, and if any pre-existing conditions are excluded from coverage.
Spafford encourages families to discuss long-term care with a licensed insurance provider.
"My recommendation is that the family be comfortable with the qualifications and competence of the professional they choose to work with," Spafford says.
The national average cost of one year in a nursing home is $80,850, according to a study by LTC Tree, a national insurance firm. Couple that with the fact that 92% of all long-term care insurance claims are for three years or less and it’s even more important that farm families have adequate insurance to provide financial security.
"Chances are we’ll need long-term care at some point in our lives," Franzen says. "If you want to protect your assets, plan for long-term care."
When purchasing long-term care insurance, it is important to make certain the policy is the right fit for your needs. These items merit heavy consideration.
- Does the policy include nursing home care, alternative care facilities, home health care and adult day care?
- Are benefits triggered by medical needs, failure to perform daily living, cognitive impairment or prior hospitalization?
- What is the annual premium?
- Compare the policy’s daily benefit and the cost of care for local facilities.
- What is the policy’s maxi-mum lifetime coverage limit?
- Is the policy renewable?