LTC: The Insurance Solution

Long-term care insurance can help pay for long-term care expenses before you or a loved one becomes eligle for Medicaid. It may allow you to keep significantly more of your savings, as well as alleviate the burden on younger generations, who often provide financial support and act as unpaid caregivers. In addition, participation in certain tax deductions.

Long-term care insurance is designed to help you maintain your quality of life, while offering you independence and increased options for care. Many policies assume the costs of nursing homes, assisted living/residential care facilities, adult daycare centers, and/or home care. Most insurers offer policies to people age 40 and over, and the amount you pay is typically based on three factors: age, current health, and specific policy features, such as breadth of coverage, levels of care, and length of benefits. As you think about a plan that’s right for you, consider these questions:

  • Is the policy “qualified” under the Health Portability and Accountability Act?

With a qualified LTC policy, you may be able to deduct a portion of insurance premiums or unreimbursed expenses that exceed a certain percentage of your gross income. Unqualififed policies do not meet the legislative requirements for tax deductions.

  • Is the policy guaranteed to be renewable?

With this protection, an insurer cannot cancel your policy unless you fail to make payments. Many insurers also offer a grace period – generally 7 to 31 days after a premium due date – which provides an opportunity for payment before a policy may be canceled.

  • Is the policy protected against inflation?

Because the purcahsed power of a dollar tends to decrease over time, it is important to make sure a policy adjusts benefits to keep pace with inflation. For examplem if a policy currently agree to pay $100 per day, the daily rate in twenty years should be more than $100 to account for a probable rise in costs. Be advised that some insurers offer inflation protection only under a policy rider commonly called a “benefit adjustments option.” There may be an additional charge for the rider, which could increase your premium by as much as 33%.

  • Is there a pre-existing conditions clause?

While this stipulation is common, there should be no more than a six-month exclusion for pre-existing conditions.

  • What are the coverage restrictions?

Comprehensive plans cover many different types of care, including nursing homes, assisted living/residential care facilities, adult day-care centers, and home care, whereas, non-comprehensive plans tend to restrict coverage to either nursing homes or home care. Some insurers only offer home care with a policy rider, often at an additional charge. There also may be stipulations regarding the licensing of facilities and state certification.

  • What levels of care are covered?

There are three main levels of care: skilled, intermediate and custodial. Licensed medical professionals provide skilled care under the direct supervision of a physician. Nurses, therapists, and nurses aides provide intermediate care, most often nursing and rehabilitation services, under the supervision of a physician. Home health aides provide custodial care, which includes companion and homemaker services, and accounts for 95% of long-term care. While this is a non-skilled form of assistance, it is considered by many to be one of the most important components of long-term care.

-Robert Catalano