Long-Term Care Insurance


Due to the continuing rise of health care costs in the U.S., more and more people are considering insurance specifically tailored to providing in-home and/or assisted-living care for their health care needs later in life. Furthermore, President Bush recently signed into law a bill that makes it difficult to transfer assets to qualify for Medicaid funding to pay for nursing home expenses. The burden for longterm care is being shifted from the government to the individual. It might be time to re-evaluate our financial planning and one option to consider is Longterm Care Insurance.

Additional Information for Long-Term Care Insurance

Long-term care insurance, an insurance product sold through a licensed insurance agent (one who represents the insurance company) or an insurance broker (one who represents the policyowner) in the United States, helps provide for the cost of long-term care beyond a pre-determined period.

Individuals who require long-term care are generally not sick in the traditional sense, but instead, are old and frail and unable to perform at least two of the basic activities of daily living such as dressing, bathing, eating, toileting, getting in and out of a bed or chair, and walking.

As an individual ages, there is an increased risk of needing long-term care. Medicare (United States) will not cover the expenses of long-term care, but Medicaid will for those who can not afford to pay.

Benefits of Long-Term Care Insurance

Medicaid generally does not cover long term care provided in a home setting; in most cases, Medicaid does not pay for assisted living. However, Medicaid does provide services for people with low income or limited resources who "need nursing home care but can stay at home with special community care services." [1] People who need long term care traditionally prefer care in the home or in a private room in an assisted living facility.

If home care coverage is purchased, long term care insurance can pay for home care, often from the first day it is needed. It will pay for a live-in caregiver, companion, housekeeper, therapist or private-duty nurse up to 7 days a week, 24 hours a day. Assisted living is paid for by long term care insurance as is adult day care, respite care, hospice care and more.

Long-term care insurance can also help pay expenses for caring an individual who suffers from Alzheimer's disease or other forms of dementia.


Other Benefits of Long-Term Care Insurance:

• Many older individuals may feel uncomfortable relying on their children or family members for support, and find that long-term care insurance could help cover expenses. Without long-term care insurance, the cost of providing these services may quickly deplete the savings of the individual and/or their family.

• Premiums paid on a long-term care insurance product may be eligible for an income tax deduction depending on the age of the covered person. Benefits paid from a long-term care contract are generally excluded from income.

Types of Long Term Care Policies

Two types of long term care policies are currently being sold: Tax Qualified and Non-Tax Qualified.

• The Non-Tax Qualified was formerly called Traditional Long Term Care insurance. This type has been sold for over 30 years. It oftens includes a "trigger" called a "medical necessity" trigger. This means that the patient's own doctor, or that doctor in conjunction with someone from the insurance company, can state that the patient needs care for any medical reason and the policy will pay.

• The Tax Qualified long term care insurance policies do not have a Medical Necessity trigger. In addition, they require that a person be expected to require care for at least 90 days, and be unable to perform 2 or more activities of daily living (eating, dressing, bathing, transferring, continence) without substantial assistance (hands on or standby) and that a doctor provides a Plan of Care; or that for at least 90 days, the person needs substantial assistance (hands on, standby or reminding) due to a severe cognitive impairment and a doctor provides a Plan of Care.

Fewer and fewer non-tax qualified policies are available for sale. One reason is because consumers want to be eligible for the tax deductions available when buying a tax-qualified policy. The tax issues can be more complex than the issue of deductions alone, and it is advisable to seek good counsel on all the pros and cons of a tax-qualified policy vs. a non-tax-qualified policy, since the benefit triggers on a good non-tax-qualified policy are better (the tax-qualified policies carrying restrictions - by law - on when the policy holder can receive benefits).

Once a person purchases a policy, the language cannot be changed by the insurance company and the policy is, if an individual policy, guaranteed renewable for life. It can never be cancelled by the insurance company.

Group long term care policies may or may not be guaranteed renewable. Many group plans include language allowing the insurance company to replace the policy with a similar policy, but allowing the insurance company to change the premiums at that time. Some group plans can be cancelled by the insurance company. These are not recommended.

Complications Encountered with Eligibility and Deductibles

Many policies have deductible periods or elimination days that may differ from 20 to 120 actual calendar days. Many policies require intended claimants to provide proof of 20 to 120 service days of paid care before any benefits will be paid. In some cases the option may be available to select 0 elimination days when covered services are provided in accordance with a Plan of Care. Some may even require that the policy for long-term care be paid up to one year before you become eligible to collect benefits.