Understanding Long Term Care (Siudi) Insurance in Israel
By Avner Goldfus, CEO Goldfus Insurance
Medical advancements and greater longevity have increased the number of long term nursing care patients in Israel. The expenses related to such an unexpected lifestyle change are particularly high. By purchasing suitable long term nursing care insurance (Bituach Siudi), you can have peace of mind that you will be receiving the best care possible, as and when you need it, without becoming a financial burden on your family.
Who is considered a long term care recipient by the private insurance companies?
With private insurance plans, the qualification is the inability to perform 3 out of 6 ADLs (Activities of Daily Living as listed below) – or 2 out of 6, if one of them is incontinence:
- Standing up and lying down
- Dressing and undressing one’s self
- Eating and drinking
- Toileting / continence
- Walking unaided
Alternatively, irrespective of the number of above ADLs, should one suffer from cognitive impairment, such as Dementia or Alzheimer’s, the insurance company will also deem the individual as a long term nursing care recipient.
In order to activate the policy, the insurance company will allocate a medical professional to carry out an assessment and ascertain if the client is indeed eligible.
Who does the responsibility fall on to look after a long term care recipient?
Most people are not aware that it is considered a criminal offense in Israel for a person who has financial means (not necessarily a wealthy individual), to not take care (either physically or financially) of a family member who requires long term care.
Clause 368a of the Israeli Penal Code reads as follows:
“The responsibility of caring for a long term care patient (recipient), as defined by the law as ‘helpless’ – whom due to age, sickness or physical and mental limitations is unable to care for his / her sustenance, health or welfare – falls on his/her family.“
What is the government’s role in caring for her citizens?
The Israeli welfare and social services provide very limited and low level services for certain individuals.
Bituach Leumi, for example, provides approximately 15.5 – 18.5 hours a week in assistance. In certain cities in Israel, these hours can be cashed in for other provisions such as incontinence pads, etc. Bituach Leumi also only gives assistance for people over “statutory” pension age, which is currently 67+ for a man and 62+ for a woman. In addition, assistance is only provided following a “means” test, so families that are semi-financially stable may either be eligible for significantly less than they had anticipated, or nothing at all.
The Health Ministry may also contribute to care for certain individuals who are both below a specific financial threshold, and in a dire health situation. The care will be provided in the lower level governmental long term care facilities and the bureaucratic process can take 6 months or more to have a long term care recipient admitted.
Don’t the Kupot Cholim offer some form of assistance?
Currently all the Kupot Cholim offer slightly different variations of collective Long Term Care plans that are cheaper than private ones. Similar to the supplementary baskets of the Kupot Cholim, members are required to sign up in order to join the collective policy. As with all group plans, the terms and conditions may be subject to change at any time. Cover is also limited in terms of sums insured and the length of time that certain amounts will be covered. Most of the Kupot plans also exclude one becoming a long term care recipient as a result of hostilities or car accident.
So what are my options?
For people with family in Israel, an appropriate private long term care policy can protect both the recipient and the family members left to care for them.
In essence, private long term care plans cover two main things:
1.They provide money on a monthly basis (according to the type of plan chosen) to cater to the needs of someone who becomes a long term care recipient.
2.They provide financial security for family members, who would otherwise be faced with the financial burden of sums that can be thousands of NIS a month.
The insurance companies provide a range of private policies, allowing them to be structured according to anticipated needs. For example, one can purchase plans to cover the life span of a long term care recipient, choose a plan for a limited number of years, or a plan that kicks in after a predetermined number of years. These are known as deferred policies. The idea behind the deferred policies is to either allow the insured to have the private plan start once the limited Kupat Cholim plan stops paying, or to self insure a pre-determined period, to reduce the cost of the premiums.
Won’t the premiums increase the older I become?
Unlike many other life and health insurance products, long term care insurance premiums are fixed (linked to the cost of living index) and do not increase with age. That means that the younger you enter the policy, the cheaper it will be.
An additional advantage that is unique to private long term care policies in Israel, is that most plans accrue paid up values, meaning that even when a policy is cancelled, there may still be value to the policy.
After about 20 years (depending on the age one joined the plan), there would be approximately 45% – 65% paid up values. Take for example a person who took out a policy for a payout of 10,000 NIS each month when they were 20. They decided to cancel the policy at the age of 40, and they became a long term care recipient aged 80. Even though the policy had been dormant and unpaid for 40 years, the person would still have cover for between 4,500 NIS and 6,500 NIS each month (index linked) according to the plan they initially took, when they become a long term care recipient all those years later.
As a result, it is often worth while insuring younger people for a higher sum insured, locking the premiums in, and then cancelling the policy when the “paid up values” reach a level that adequately covers one’s needs, in the event of becoming a long term care recipient in the future.
How do I know how much to insure myself for?
There are two options.
1.Home Care – in the comfort of your own home
2.A Nursing home
The cost for home care including all the surrounding costs, is approximately 7,000-9000 NIS per month and the cost for a private nursing home can often be in excess of 15,000 NIS per month.
All the sums insured are linked to the cost of living index, meaning that the amounts should increase over the years with some correlation to inflation.
Due to the large range of potential expenses, few insurance companies have created a product allowing you to cover a pre-determined sum insured for home care which would automatically double should the long term care recipient be required to enter a private nursing home.
For example, should a person insure themselves for 8,000 NIS a month for home care, and they later deteriorate and move to a private nursing facility, the sum insured would automatically double to 16,000 NIS a month.
Are there any other elements that should be considered?
Most insurance companies in Israel will only pay out a policy if the insured in being cared for in Israel. As a result, if your intention is to be cared for by family members abroad, it is worth raising this point with your agent so that the policy can be structured appropriately.
Another important point to consider is the nomination of a power of attorney to manage finances. Often when a person becomes a long term care recipient, they are unable to manage their funds and as a result, nominating a power of attorney in advance will ensure that the policy is being used appropriately and according to relevant expenses.
Long term care policies are often considered too late in life when the premiums are prohibitively expensive and potential medical exclusions make it unattainable. Long term care plans are designed to protect your family from financial burden as well as to protect the recipient. Explore your options, understand the policies and encourage other family members to purchase a policy earlier in life to allow for cheaper and fuller protection.
For more information about Long Term Care Insurance, please contact us today!