NEW YORK (MainStreet) — Celebrities, such as Mel Gibson, Harrison Ford and Gisele Bündchen are reportedly buying up beach front property in Costa Rica, and retiring Boomers seeking alternative long-term care options are following suit.
"More Americans are choosing to retire all over the globe but that can affect the amount of benefits they can claim from their long term care insurance policy," said Jesse Slome, executive director with the American Association for Long-Term Care Insurance (AALTCI).
An estimated 1.4 million American retirees live overseas, according to Live and Invest Overseas, and as more Boomers look to retire outside of the United States, understanding how such a move can impact long-term care insurance benefits becomes vital.
“We've received an increase in the number of consumer calls questioning what happens to their long term care insurance if they move to a new state or out of the country, such as Costa Rica, Panama and Canada,” Slome said.
The difference in international coverage can be significant.
“It depends on when the policy was purchased,” said Mitch Abrams, managing director with Homewatch CareGivers. “The older policies were more lenient on providing support internationally, but the current plans are very limited on what benefits they’ll provide when you move out of the U.S.”
Many of the leading long-term care insurers impose a limitation on benefits when care is needed outside of the United States or territories, according to 2014 AALTCI data.
"You can purchase a policy designed to pay four years of benefits, but if the international limit is just one year, you'll either have to move back to the U.S. for care or give up the balance available," Slome said.
One thing that stays the same is currency. Claims are paid in U.S. dollars.
“Some international policies will mandate you are given care by a provider who has a license,” Abrams told Mainstreet. “So if a policy says care must be delivered by a licensing agency and you’re moving abroad, you want to pick a location that requires licensure of their agencies in order for you to realize that benefit.”
Typically, the international component of newer long term care policies is a lower and limited payment.
“MedAmerica provides a cash benefit once you are benefit eligible,” Abrams said. “Other carriers that provide international coverage today are Bankers Life but Bankers limits the lifetime maximum.”Gringo Retirement
Under a Genworth policy, the nursing home benefit is limited to a 50% payout abroad, according to Homewatch CareGivers.
“That means if you had a domestic benefit worth $200, it would only carry a $100 dollar value overseas when in a nursing home,” said Abrams. Overall, long term-care insurers are not focused on providing long-term care benefits on an international basis for more than one year.
“The decision on where to live must be made long before retirement,” said Abrams. “You don’t want to read the small print of a ten-year-old policy at 70 years old.”
John Hancock’s personal long-term care policy benefit only lasts for 365 days in an international environment, according to Homewatch CareGivers.
“So if you had a five-year paid plan on the Hancock commercial platform and you moved overseas, you would only get paid for one year, losing four years of eligibility,” Abrams said.
—Written for MainStreet by Juliette Fairley