Does LTCI Have A High Deductible Option?


Official Sod Turning Ceremony for Extendicare ...
Official Sod Turning Ceremony for Extendicare Long-Term Care Home, Port Stanley, 1976 (Photo credit: Elgin County Archives)

I typically watch NFL football on Sunday afternoons.  For 3 hours each week I escape into a world where the cares of every-day life do not matter.  I become one of the millions of Americans who desperately need exercise who watch 106 men who desperately need a rest.

A week ago I was reading some questions in a financial forum while I was waiting for the game to come on my TV.  The question below caught my eye.

Below you will find the question and my reply.

QUESTION

“…Does the industry have a policy with a very high deductible? I just signed up for a Medigap Plan F high deductible policy. I have the highest deductible I can get for my auto insurance. I can afford to self insure for these deductible’s.

I do not know if I can self insure for long term care. I think I am in a gray area, close, but not a sure thing, thus my interest in a high deductible type of policy…”

ANSWER

“…  what you are looking for does not exist. The concept of a deductible is foreign to Long Term Care Insurance (LTCI.) It is replaced by something called an Elimination Period. That is the amount of time you have to pay for Long Term Care expenses before the insurance kicks in. The longest Elimination Period that I have seen is 365 days. That means that you have to pay all your Long Term Care expenses for 365 days before the insurance pays anything.

There is a plan in many states called a “Partnership Plan.” When you speak with your broker, ask him if your state has a “Partnership Plan.” If it does, your assets are sheltered from Medicaid’s “Asset Test” and “Estate Recovery.” I am not aware of any insurance company that offers an unlimited benefit anymore but as long as you purchase a LTCI policy that is equal to the value of your assets, if you use up all that money and have to rely on Medicaid, you are not forced to “spend down” your assets and potentially impoverish your wife or disinherit your children merely because you were unlucky enough to get sick.

There is another option in which you may find some help. A handful of Life insurance plans today have added a Long Term Care rider. Basically, they allow you to access your death benefit on a tax preferred basis if you need Long Term Care while you are still alive. Whatever is not used for Long Term Care needs is paid to your beneficiary when you die. If you are wanting to leave a charitable gift to your school, church or cause when you die, this may be an option. If you remain healthy, they will get all of your gift. However, if you need help with Long Term Care bills, it will be there.

The best advice that I can give you is to continue studying so that you can tell your broker after the first of the year what you want rather than rely on his opinion. Some brokers are excellent problem solvers. Unfortunately, some brokers are nothing more than glorified sales people. If you ask questions, like this one before you speak with a broker, you will know what you want prior to your visit and the broker will only do his job of coordinating the paper-work and underwriting. At least you should be able to tell if you have a good or bad insurance agent.

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