Most responsible adults buy insurance to protect against risk. We buy auto insurance protection for liability and vehicle damage. We protect ourselves from expensive healthcare costs with health insurance. Likewise, we can also protect ourselves from expensive nursing home costs with long-term care insurance.
Few financial risks justify insurance solutions more than nursing home costs. According to "What You Should Know About Long Term Care," an online publication by the State of Indiana, the average Indiana nursing home cost exceeds $70,000 per year and rises at an average rate of 5 percent per year.
Indiana took a national leadership position in the long-term care insurance industry more than 22 years ago by establishing the Indiana long-term care insurance program (ILTCIP). The ILTCIP is a remarkable three-way partnership between the State of Indiana, insurance companies, and insurance customers to help pay the rising cost of nursing home care at home healthcare. In this partnership, the State of Indiana promises to pay long-term nursing home costs for people that by at least minimum long-term care coverage from insurance companies that agree to offer coverage specified by the State.
Indiana's ILTCIP promise offers two levels of protection. First, the purchaser of an ILTCIP insurance policy can keep $1 of assets for every $1 that the insurance company pays for the insurance policy purchaser's nursing home care (sometimes called "dollar-for-dollar" coverage). Second (and more impressively), if the ILTCIP insurance policy purchaser buys a certain coverage level, once the insurance policy pays out the full coverage amount, the State will pay the remaining nursing home costs without requiring the policy owner to spend down any assets (this is called "total asset protection" coverage).
One of the ILTCIP requirements is that the insurance coverage of an ILTCIP policy will increase by 5 percent each year after the customer purchases the policy. Likewise, the minimum insurance coverage level for total asset protection coverage increases every year by 5 percent. The 2015 minimum coverage level is $320,883, but the minimum level will increase for 2016 to $336,927.
An example may help explain how an ILTCIP policy works. If an insurance customer with a house on 20 acres, a car and $200,000 of other assets buys $320,883 of ILTCIP coverage in 2015, and then requires nursing home care in 2022, the required insurance policy payout at that time will be $451,515. Once the policy pays out its entire benefit, the insurance customer's monthly income will pay part of the nursing home costs and the State of Indiana will pay the rest of the bill for the rest of the insurance customers life -- with no questions asked.
Most full-service investment companies and full-line insurance agencies sell long-term care insurance. In order to sell ILTCIP policies, financial representatives must get an additional training and an ILTCIP endorsement on their life insurance sales licenses.
There are many insurance alternatives to ILTCIP policies. Much like life insurance, the cost of long-term care insurance increases with the age of the insurance policy purchaser, so coverage is less expensive when people buy it in their earlier years. People with certain medical histories like diabetes, hypertension, and strokes may not qualify for long-term care insurance coverage, so that is another good reason to buy the insurance early, before such health conditions develop.
Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers and Jeff is a Fellow of the American College of Trust and Estate Counsel. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator and was the 2014-15 President of the Indiana State Bar Association.
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