One of the first questions I ask clients who want to discuss planning for long-term care is whether they have long-term care insurance. Those who do not have long-term care insurance express concern about the cost and the fact they may never use the benefits that long-term care insurance provides.

Men and women have an average life expectancy of 76.5 years. However, a person who lives to age 65 has an average remaining life expectancy of 17.7 years (to age 82.7). The longer you live the longer your life expectancy. Most people who live into their 80s and 90s will require some type of care before they die. Your health and family history may also impact your likelihood of needing care in the future. Most people you ask would prefer to be cared for in their home, rather than in a nursing home or other long-term care facility. Long-term care insurance is one resource that can be used to pay for the care you may need as you age, whether it’s at home, in an assisted living facility, or in a nursing home. Here are five facts about long-term care insurance.

1. Not all Long-Term Care Insurance Policies are Alike. Not all long-term care insurance policies are created equal. Long-term care policies generally provide a dollar amount that the policy will pay each day toward your care if you meet a certain threshold level of need for care or assistance. Policies vary greatly in the daily benefit amount provided, the length of time that benefit will be paid (i.e. for one year, three years, etc.), the types of care the policy benefit will pay for, and whether the policy has inflation protection. Each of these different aspects of the policy impacts the policy’s cost. A long-term care insurance agent can help you understand which features of the policy are most important for your particular situation, which are worth paying extra for, and which are not. For example, someone with a large pension may require a smaller daily benefit amount. It is also important to understand the financial strength of the company issuing the policy in order to help determine whether or not that company will be around to pay the benefits when you need them.

2. Read the Fine Print to Ensure You are Covered for the Care You Want. Although most people would prefer to receive any care they may need in their home, not all long-term care insurance covers home care. Make sure you understand the type of care your policy covers and the level of care you must require before the policy will begin paying benefits. The policy may also specify who must deliver the care you need — some policies will pay a benefit even if a family member is delivering that care, some will not.

3. Don’t Wait Too Long To Decide if Long-Term Care Insurance is Right for You. In addition to the benefits provided by the policy, your age at the time the policy is purchased is the other important factor in determining the cost of a long-term care policy. If you decide that long-term care insurance makes sense for your situation, don’t delay. The best time to purchase such a policy is when you are in your 50s or 60s.

4. Make Sure Your Policy Qualifies for the Estate Recovery Exemption in Massachusetts. In Massachusetts, an individual can be eligible for Medicaid benefits to pay for long-term care even if he owns a home. However, the Commonwealth will place a lien against the home so that it can recover the cost of those benefits if the home is sold or upon the death of the Medicaid recipient. Massachusetts does, however, allow the home of an individual who has a long-term care insurance policy that meets the criteria established by the state to be exempt from post-death recovery of benefits paid. The logic behind this provision is to encourage people to purchase long-term care insurance, giving them another resource to pay for their care, thereby reducing the amount the Commonwealth must pay towards their long-term care costs.

5. Some Policies Provide an Answer to What Happens If You Never Need Long-Term Care. “Hybrid” long-term care policies provide long-term care benefits along with a death benefit (like a life insurance policy) if you never use, or use only a fraction of, the long-term care benefits the policy provides. These types of policies are more expensive than standard long-term care policies. However, they may be a solution for those who hesitate to purchase a standard long-term care policy because they are not certain they will ever need the benefits the policy provides. An experienced long-term care insurance agent can educate you about the various types of long-term care insurance policies and guide you to the policy that is most appropriate for you.

There is a lot of chatter out there about how to protect assets from having to be spent down on long-term care expenses and much of that revolves around positioning assets in order to become eligible to receive Medicaid benefits. Although Medicaid provides more benefits for community-based care than it has in the past, it is primarily a benefit used by those in nursing homes. As with all public benefits programs, Medicaid is likely to suffer cuts to the program and reductions in the services it is able to provide in the future. If you want to ensure you have sufficient resources to pay for your own care in a location of your choice, such as in your home or in an assisted living facility, long-term care insurance is an option worth exploring.

There are many places to educate yourself about long-term care insurance. The Commonwealth’s Office of Consumer Affairs and Business Regulation publishes an excellent guide to long-term care insurance for consumers. Find it online at http://www.mass.gov/ocabr/consumer/insurance/health-insurance/consumer-guides/ (click on Long Term Care Guide).

Attorney Maria C. Baler is an estate planning and elder law attorney and a partner with the Dedham law firm of Samuel, Sayward & Baler LLC. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information, visit www.ssbllc.com or call (781) 461-1020.

(November 2012)