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What You Should Know About  Long Term Care Insurance?
 

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• What is Long Term Care insurance ? 
• What are the Chances that  I Will Need Long Term Care? 
• How Much Do Long Term Care Services Cost?
• Does Health Insurance, Medicare or Medicaid Cover the Cost of Long Term Care?
• How  Much of the Cost of Long Term Care Does Long Term Care Insurance Cover?
• What is the Cost of Long Term Care Insurance?
• How Can I Purchase Long Term Care Insurance?
• Are Long Term Care Insurance Premiums Tax-deductible?
• Does Long Term Care Insurance Have  Consumer Protections?

Long Term Care is the assistance needed for an extended period of time if a person develops an impairment in the activities of daily living (i.e., eating, dressing, bathing, or toileting ) or a cognitive impairment, such as Alzheimer's disease.

Long Term Care differs from the medical care received in the hospital or health-care provider's office, which usually is covered by private health insurance or Medicare.

Advances in medical science have increased the average life expectancy significantly.  The average  lifespan for  a person born in 1900 was 47 years.  For someone born in 1997, it is more than 75 years.  The aging of America will continue as the baby boomers mature and medical science and technology advance.

Today about one in five Americans over age 65, and almost half of those over 85, need assistance with everyday activities.  Because women generally live longer than men by several years they are almost twice as likely as men to need a nursing home after age 65.

People of all ages may require Long Term Care due to an impairment in certain activities of daily living or cognitive impairment.  But most Long Term Care services are used by older people.  The longer a person lives, the greater the chance he or she will need some type of Long Term Care services.

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Long Term Care services can be very expensive.  One year in a nursing home costs, on average, $36,000.  The cost can be considerably higher in some parts of the country.  Home care can be less expensive, but still costly.  For example, two visit a day by a home health aide to help with bathing, dressing and household chores can total more than $2500 a month.  If more skilled helpers are needed, such as physical therapy, the expense can be much greater.

Health insurance plans generally do not pay for Long Term Care services.  Many Americans mistakenly believe that Medicare will pay for their Long Term Care needs.  However, Medicare provides only short-term, skilled nursing home care following hospitalization.  It also limits help at home to those who need skilled nursing care and rehabilitative services.

Medicaid is the federal-state health insurance program for the poor.  Middle-income individuals may qualify for Long Term Care under Medicaid, but only after impoverishing themselves.  To be eligible for Medicaid, you must meet increasingly strict rules regarding income, assets, and depletion of life savings.

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Unlike government programs that primarily pay for nursing-home care, Long Term Care insurance covers a wide range of services to help individuals live at home as well as receive skilled care in a nursing home.

Services  covered under Long Term Care insurance policies range from assistance with  daily living--such as bathing, eating, going to the toilet, moving from place to place, and dressing--to 24 hours skilled nursing care.  These services can be provided at home, in a nursing home or community-based care facility such as adult day care, or in an assisted living  setting.

Policies may include reimbursement of respite care, medical equipment, care coordination services, and even home modifications.  Some policies pay family caregivers, and some pay for services such as assisted living that may not be covered by Medicaid in a particular state.

Premiums may vary by the type of services covered (care at home or in the facility), the amount of the daily benefit, the duration of the benefit, and the length of waiting period before benefits begin.  You can select policies with inflation protection to ensure that your policy retains its value over time.

The age at which  you purchase a policy has a significant impact on its cost.  But the younger you are, the lower the cost.  For example, a 45-year-old pays approximately half of what a 60-year-old pays for Long Term Care insurance, and once a person purchases a policy, premiums cannot be increased because a person grows older.  Premiums can only be increased for a whole class of insured.

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Long Term Care insurance can be obtained on an individual basis or through a group plan offered by an employer.  Employees covered under qualified, employer-sponsored Long Term Care insurance can continue their coverage when they leave their employer, as long as they continue to pay the premiums.

An alternative is to obtain coverage under an accelerated death benefit.  Some life insurance companies allow policyholder's to collect a percentage or all of their  policy's death benefit to finance specific Long Term Care needs.  Upon the policyholders death, the benefit paid to the beneficiary is reduced by the amount that was accelerated to pay for Long Term Care.

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Under federal law enacted in 1996, qualified Long Term Care insurance policies and qualified Long Term Care services are treated the same as health insurance for federal tax purposes.  This means that you can deduct from your federal income taxes both premiums for Long Term Care insurance and out-of-pocket expenses if your costs exceed the 7.5 percent base for medical expense deductions in the tax code.  The amount of annual premiums you may be able to deduct depends on your age.  In addition, insurance benefits from qualified Long Term Care policies are not taxable as long as the benefits received do not exceed certain limits.

Most Long Term Care policies purchased before 1997 are considered qualified for federal tax purposes.  If you purchased a policy more recently, ask your insurance company if yours is a qualified policy.

Recently, many  states have begun providing tax credits or deductions from state taxes for Long Term Care insurance premiums.  Check with your accountant, attorney or state tax department to see if you your state offers this type of incentive to purchase Long Term Care insurance.

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All Long Term Care insurance policies must meet the consumer protection standards set by the state in which they are sold.  In addition, the Long Term Care policy that qualifies for federal tax deductions must meet a number of consumer protection standards set by the federal government.  For example, qualified policies:

• May not limit or exclude coverage for certain illnesses, such as Alzheimer's disease.
• Cannot increase premiums due to advancing age.
• Cannot be canceled because of advancing age or deteriorating health.
• Must offer a non-forfeiture benefit.  If purchased, this benefit ensures that if you  cancel your policy or let it lapse, some portion of your benefits will still be available for a certain period of time.
• Must offer an inflation protection benefit.  If purchased, this benefit ensures that your benefits will keep pace with inflation, a particularly important feature for those who plan for the future by purchasing a policy at a younger age.