by Tinker.Bell_270 » Sun Aug 29, 2010 08:48 pm
My Mom purchased a LTC Ins. Policy 14 yrs ago after my father passed. Figured would be all she needed. Dad didn't believe in Reg. Life Insurance so she didn't either. She never asked any of her 3 children. We live in State of NE. Has large premium to pay every year. Now what? Wouldn't Life Insurance Policy have been way better? What will happen with this new Obama Care now? Death Benefits for heirs sounds like after saving for years all her money including home will basically go to government. Is that correct? I have no idea who she got this policy from.
Posted: Mon Aug 30, 2010 02:31 pm Post Subject:
TinkerBell . . .
Life insurance does one thing, LTC insurance does another, and Obamacare will have no effect on either (at least initially).
Your mother's LTC policy will provide a benefit if she is determined to be chronically-ill and cannot perform two or more of the six activities of daily living (ADLs -- eating, dressing, bathing, toileting, continence, transferring) or has been diagnosed with a "cognitive impairment" (Alzheimer's disease, dementia, etc). The average cost of confinement in a SNF in Nebraska is just under $49,000 in 2010 (in California, it would be closer to $70,000, almost 50% more than in your state).
It is probably not something she should consider giving up after all these years. If her policy includes "inflation protection", her daily benefit would be at least 70% more than the original daily amount (5% simple), and could already be much more than double what it first was (5% compound).
Even though her premium may be "large", a nursing home confinement of just 60-90 days will "recover" all she has paid in premiums over the past 14 years in benefits paid, and still provide her with benefits for, I'm guessing, at least another 33 months, if not longer.
By comparison, Medicare only pays for 20 days of Skilled Nursing Care only following a hospital confinement of 3 days or longer (and then limited payment for the next 80 days, but after 100 days, NOTHING!!). LTC insurance will not only pay for care in an SNF, but virtually all other levels of care, including home care and adult day care (if the policy is "comprehensive") -- it does not pay hospital or doctor bills.
LTC insurance can prevent having to deplete personal resources, or sell assets, to provide the care a person requires. It allows a person to remain independent of the government, and even one's own family, in the face of a debilitating condition. Qualifying for such assistance via government programs such as Medicaid can be impossible for persons with substantial personal assets or cash resources.
Life insurance answers a different question: What will happen to others I leave behind when I die? If that is the fundamental concern, then LTC insurance is not going to solve that dilemma. But if your mother has significant savings, there is little in the way of debt or a mortgage on the home, and her total estate is not large enough to be subject to estate taxes (not more than $1,000,000 on 1/1/2011), then life insurance may not be an important consideration.
Death Benefits for heirs sounds like after saving for years all her money including home will basically go to government. Is that correct?
There is some misconception here. The government gets nothing if your mother makes the proper plans well in advance of her death. But the government does not just come in and take one's home after they die either.
With LTC insurance, your mother will probably never need to rely on Medicaid to cover any expenses of long term care. If that's true, the government will not have any right to "asset recovery" as they do when they pay the bills under Medicaid.
Estate taxes are a different matter. In 2010, there was supposed to be no estate tax if anyone died this year. But because a couple of very wealthy individuals chose to die in the "perfect" year, Congress is considering taking away that free pass for one's heirs -- the good news is, they only have a couple of months left to change the law, and right now they're busy running for reelection, so they are seriously distracted. But it could still happen.
But, on 1/1/2011, estate taxes are coming back, and could affect everyone with more than $1,000,000 in net assets. Properly placing personal property, such as a home and other items of significant value, into a trust of one kind or another, can protect that property from what will probably be a restoration of the maximum 55% tax bite (as under the old rules).
Your mother needs genuine estate planning advice -- from an attorney who specializes in estate planning/wills/trusts or a Certified Financial Planner (CFP) or other appropriately credentialed adviser.
Those persons, in conjunction with a licensed insurance agent, can help your mother determine what her best course of action is, and which insurance products are appropriate for her needs.
I have no idea who she got this policy from.
Are you speaking about the agent or the insurance company? Either way, that information will be in the contract -- or in the application which is a part of the contract. Just look.
If you need additional information, feel free to send me a PM or send me an email (posted in my profile page).
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