Should you Purchase Long Term Care Insurance?
Long term care insurance is an insurance product sold that is available in the United States, Canada and the United Kingdom. It offers support for the cost of long-term care that goes beyond a pre-determined period of time. This particular insurance product covers the care that is not generally covered by a person’s health insurance, Medicaid, or Medicare.
Long term care insurance is recommended for individuals who will require long-term care but are not sick in the traditional manner. They are however, not able to perform the activities of daily living or ADL. These activities include getting dressed, eating, bathing, transferring from a bed to a chair and vice versa, and walking. Obviously, age is not the basis for requiring long-term care insurance. Over 60 percent of people beyond the age of 65 will need some form of long-term care service in the course of their lifetime. Around 40 percent of people with long-term care today are between the ages of 18 and 64. Once a shift in health takes place, buying long-term care may be too late. Early onset Alzheimer’s and Parkinson’s disease is uncommon but they do happen.
Schedule of Benefits
A long term care insurance policy covers home care, adult day care, assisted living, hospice care, respite care, Alzheimer’s facilities, and nursing home. If the insured purchased home care coverage, the insurance can kick in on the very first day it is needed. It will cover costs for a live-in or visiting caregiver, housekeeper, companion, private nurse, or therapy up to the maximum policy benefit. As many people are uncomfortable depending on family for support, they turn to long term care insurance to cover out-of-pocket expenses. Without this coverage, the cost of these services can drain one’s savings.
What’s more, the premiums for long term care insurance may qualify for income tax deduction. The tax savings would depend on the insured’s age and the benefits from this insurance product are not considered income.
In the United States, some long term care benefits are covered by the state-sponsored Medicaid program. Medicaid is a welfare program that provides medical services to people with limited resources. This program usually provides community care services enabling people who cannot afford nursing home care to live in a government-run nursing home facility.
The types of long term care policies offered in the U.S. are categorized based on how they relate to income tax. They are tax qualified and non-tax qualified. Tax-qualified policies are the most common. It requires a candidate to firstly be expected to need care for a minimum of 90 days and secondly, be unable to perform at least two activities of daily living for a minimum of 90 days. In both conditions, the attending physician should provide a plan for care.
The non-tax qualified long term care insurance used to be known as the traditional long term care policy. It typically involves what is known as a medical necessity condition. This simply requires that the insured’s doctor plus a doctor from the insurer both agree that the patient needs care in order for the policy to start paying benefits. The government has not yet released a clarification on the benefits earned by people under this type of long term care plan, which means that the applicable taxes are open to interpretation. Sometimes the tax issues relating to long term care plans can become very complex and it would be wise for people to seek the assistance of a tax lawyer to understand how this will be handled.
Once the insurer issues the policy they can no longer change its language and they are beholden to renew it for the rest of the insured’s life. The only reason this policy can be canceled by the insurer is non-payment. The benefits of long term care insurance are often structured on a reimbursement method and most insurance companies only provide coverage within the U.S.
The factors that provide the basis for the rates and premiums of long term care insurance include, age, benefit, length, inflation protection, elimination period, and health rating. Insurers have been known to offer discounts on different structures of individual policies, such as a couple’s policy. Payment modes can be monthly, quarterly, semi-annually or annually. Some riders like survivorship, benefits restoration, non forfeiture, and return of premium can be availed of by the insured.