Wednesday, January 17, 2007

Long Term Care Policy

In New York State, and perhaps elsewhere, the government has teamed up with insurance companies to provide Long Term Care policies. My mother was smart enough to have purchased one years ago. In a nutshell, here's how they work*:

• The person purchasing the insurance pays premiums.
• The premiums are set when the policy is initially purchased and never go up (at least my mom's doesn't).
• Premiums are set by the insurance company's actuarials...the younger you are when you start the policy, the lower the premiums, because you will be paying for a longer time.
• How do the insurance companies win? They're betting that you die before you make a claim on the policy. Like car insurance in reverse where you bet that you are going to have an accident and they bet you won't.
• How does the state win? They mitigate their outlays by sharing the cost of elder care with the insurance company.
• How does the purchaser/insured win? Their assets are protected should long term care be required. Without this type of policy, all assets must be liquidated and spent before government assistance kicks in. In other words, if you end up in a nursing home, the government doesn't pay anything until you are broke — having sold your house, emptied your bank accounts, and essentially spent your children's inheritance.

My mother purchased this policy, not so much to protect her assets, but she didn't want to be a burden on her family.

Here's why:

After you're broke, the government only pays $x amount per day for your care. Guess what. That's enough for the most basic of facilities. If you want to be somewhere nice, with lots of nurses and activities and nice rooms, well that costs more. Remember, at this point, you are destitute. So your family would have to make up any difference. Hope they have money, they are generous, and you didn't piss them off along the way!

The insurance policy only lasts for a certain amount of time established when the policy is bought. After the benefits run out, Medicare kicks in but with the policy your assets are protected and the government covers you at the same daily dollar amount that your insurance company was paying.

*Of course, check the details because ours may be different than what you find or are offered.

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