How Partnership Policies Can Save Your Assets When Long-Term Care Becomes Necessary

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Seniors need to plan what to do if long-term care ever becomes necessary. Besides the development of illnesses that could put you in a nursing home, there is also the possibility of being in a car accident, having a heart attack, or developing dementia, which could put you in need of that kind of care.

The possibility means you must be prepared for it so you can decide how to get prepared. Medicare will not pay for it. They may cover up to 100 days after a hospital stay if you do not need personal care or supervision.

Medicaid Coverage

Although Medicaid will help pay for it, this state-funded service usually requires getting rid of (spend-down) your assets and having less than $2,000 per month in income. The terms will depend on where you live.

Partnership Policies

In the 1990s, the federal government created partnership policies. These government-approved policies work with people who own a long-term care insurance policy. Because many people were afraid to lose their assets if their long-term care policy ran out of money, partnership policies enable people to get Medicaid help for long-term health care without spending down their assets.

The Need for Nursing Home Care

While no one can predict whether they will ever need nursing home care, many people will. Forbes reports that an individual’s health at 65 helps predict who will need nursing home care. About 30 percent of those in good health will not need it, but only about 5 percent of those with poor health will not need it.

Many seniors will need short-term care in a nursing home. Forbes also reports that married people and those with some college education are less likely to need long-term care nursing homes. Hispanics and Blacks are more likely to need it.

Nursing Home Care Cost

Even though every state has different costs for nursing home care, it varies considerably depending on where you live. TheSeniorList reveals that costs vary between a private room and a semi-private room.

The most expensive state for nursing home care is Alaska, where it will cost as much as $33,431 per month in 2023 ($401,172 per year—more than $1,000 per day) for either a private or semi-private room. The next most expensive state is Connecticut, which is less than half the cost of Alaska—$16,094 per month for a private room and $14,602 for a semi-private one. The least expensive state (Iowa) offers nursing home care for $7,906 per month for a private room and $7,293 ($87,516 per year) for a semi-private one.

The Cost of Long-Term Insurance

Long-term care insurance policies vary widely in cost. You buy them based on how long you want to be covered—or depending on what you can afford. Most of these policies, NerdWallet says, have an elimination period, which means you will pay for the first 30, 60, or 90 days. After that, you will usually need to be reimbursed for expenses.

The average man may need about 2.2 years of coverage, and the average woman needs coverage for 3.7 years. Some policies let spouses, when coverage is purchased for both, share coverage after reaching the maximum limit or one of the spouses.

Alternative Ways to Get Long-Term Coverage

Because long-term care insurance is beyond the reach of many people, there are some options. Here are some of them.

• Life Insurance with a Long-term Care Rider

Whole-life policies are available from some insurance companies that offer a long-term care rider with it. If long-term care is needed, the policy pays so much money for the services given. USAA says that some of the policy’s death benefits are available to cover long-term care—such as 50 percent.

Money used for long-term care decreases the death benefit by an equal amount used for long-term care. It may also reduce the cash value of the policy. Investopedia says this type of rider is usually cheaper than buying a stand-alone long-term care policy.

These policies often provide services in various settings, such as nursing homes, assisted living facilities, and home care. The policy can also be used to protect your assets. Also, if the benefits are not needed, your beneficiaries will still receive the full death benefit.

• Benevolent Care Funds

Another option is to consider looking into places that offer benevolent care. MarketWatch says that some nursing homes and assisted living communities offer benevolent care. These homes are usually faith-based and take in some people who do not have enough money for long-term care.

• Stay Healthy

The best way to reduce or eliminate the need for long-term care is to remain as healthy as long as possible. Of course, this is not a guarantee, but taking care of your health can help reduce the possibility of needing extensive and costly medical care later in life.

• Pay for It Yourself

If you have the money you could pay for it out of savings, investments, and other assets.

• Get a Home Equity Loan

If you have considerable value in your home’s equity, you could get a home equity loan to cover the need—or part of it.

• Sell Your House

Selling your home and using the funds to pay for your long-term care is one way to do it—if you have considerable equity.

• Get a Reverse Mortgage

A reverse mortgage is a loan on the value of your home that lets you live in it as long as needed. You could use it to pay for home care.

The cost of long-term care is out of reach for many people. You may be able to solve this problem by checking with a life insurance company that sells a long-term care partnership policy. Compare prices before buying because costs will vary considerably between companies. Also, find out if premiums increase—some companies guarantee they will not.

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