1. LTC insurance is not necessary – the government pays for this
Correct! The government will pay for LTC needed, in a nursing home only in many areas, once you are impoverished (broke), unless you have given any money away, for any reason in the past 5 years. You are allowed to retain just under $2000 of assets, socks, underwear, and slippers, $45/month of income, and life insurance – unless it will pay more than $1500 at death in which case it must be cashed in first.
Married people can retain (in the name of the spouse at home) a house, automobile, 1/2 the liquid assets – but that half cannot be larger than $115,920 nor less than $50,000, and income for the spouse at home of up to $2898/month. The state will file a lien against those assets and recover them (before your will take effect) after the death of the at home spouse.
The nursing home will be losing approximately $3000/month on your care. They can say no to you as you wish to move in, but cannot make you move out after you are there. Hopefully there is one nearby, that is nice, willing to take that loss on you.
2. I don’t like that scenario, what is the alternative?
You might have the income to cover an extra $3000 to $4500/month at an assisted living facility, or up to $8500/month in a nursing home, in which case you are fine, nothing to worry about.
Alternatively, you might consider LTC insurance. You probably will not need as much of it as you might anticipate as your lifestyle will change considerably when one of a couple needs care. The boat may no longer be used, likewise the snowmobiles, motorcycle(s), camper, second or third car, etc. There may be no more trips to Branson, cruises, weekends in Door County or the Catskills, etc.
Once you determine how much or little of your income is needed to maintain the home and spouse there, you have an idea of how much income can go towards the cost of care. If you have savings, even if you do not want to use them up, you might use the interest generated (yield). Only the remainder needs to come from LTC insurance.
Some people will go a bit farther, and choose to cover only the cost of care at home or assisted living facilities. If this is your plan, you need only be able to generate about $4500/month to pay for that level of care. Thus the LTC insurance would be keeping you OUT of a nursing home in most cases, and a smaller policy is all that is needed.
Lets look at an example of a 60 year old couple who decides that a benefit of $3300/month ($110/day) is appropriate for them. They choose a 10 year benefit, meaning the policy will pay for 10 years of care, each, once care is needed. The first 90 days of care is the deductible, their responsibility, and they include the absolutely necessary 5% compound automatic inflation feature.
The 5% compound inflation feature raises the price of the policy a bit, but the benefit starts at $3300/month, and increases at a rate of 5% compound each year, gradually doubling in 15 years, or quadrupling in 30 years, while the premium is designed to stay level. Since these two are in good health, only blood pressure and cholesterol medication is used, the annual premium for this couple is $3912/year. That is the interest generated annually by $130,000 of savings earning only 3%. Interest earned is generally taxable, but the premium for LTC insurance is tax deductible.
Now which is better in your opinion, buying LTC insurance, or crisis management? Get more information at www.TheLongTermCareGuy.com