|
Inside this Article
What is the
long-term care insurance?
The aging of America is one of the biggest factors contributing to the
growing interest in long-term care (LTC) insurance. According to
U.S.
|
Sponsored
Links
|
Census Bureau data, the median age in America has been rising and
the last of the 76 million Baby Boomers will reach age 65 by 2030 --
doubling the elderly population in America. The U.S. Department of Health and Human Services estimates that
about 40% of people aged 65 or older have at least a 50% lifetime
risk of entering a nursing home.
|
For its part, the Health
Insurance Association of America estimates that by 2020, 12
million people may require long-term care. At a time when the
average cost of a private room at a nursing home tops $74,000 a
year.
long-term care insurance can be a solid investment for
individuals who have assets they want to protect or who want to avoid
becoming a financial burden to their family. But unlike other types of
insurance, in which policies are standardized or fairly straightforward,
long-term care policies are complex and vary widely. Virtually
every company's policy differs on such matters as who qualifies for
coverage, when the policyholder can begin receiving benefits, the amount
of coverage, the term of the policy, and premium costs.
Before you begin comparing policies on a feature-by-feature basis, it
is important to understand some of the basics.
What Long-Term Care Insurance Is -
And Is Not
Long-term care insurance is not life insurance, disability
insurance, or health insurance. Instead, LTC includes a range of
nursing, social, and rehabilitative services for people who need ongoing
assistance due to a chronic illness or disability. LTC insurance
can be used by anyone at any age who suffers an accident or debilitating
illness, but it's most frequently used by older adults who need
assistance with essential physical needs, such as bathing, dressing, or
eating.
For the most part, those who need long-term care are left to foot the
bill on their own. Neither Medicare, nor Medicare supplemental coverage,
also known as Medigap insurance, nor standard health insurance policies
fully cover long-term care. That leaves most of us with two options when
faced with such expenses: pay out-of-pocket or rely on private long-term
care insurance.
Most LTC policies are "expense-incurred" or indemnity
policies, which pay a fixed-dollar amount toward the cost of daily care.
Policies tend to cover a variety of care settings, including nursing
homes, home health care, assisted living facilities, and adult day care.
Since premium costs increase depending on your age at the time of
enrollment, the younger you are when you purchase a policy, the lower
the premium you'll pay during the life of the plan.
Once you purchase a policy, premiums generally remain the same each
year, so experts recommend that individuals start thinking about
long-term care long before they need it. Because long term care
insurance premiums are based on age at the time of purchase, the
younger you are when you purchase a policy, the less expensive it
typically will be.
Shopping for Long-Term Care
Insurance: Consumer Guidelines
When shopping for long-term care insurance make sure you take
your time and compare the features of several policies. State insurance
regulators and the American Council of Life Insurance, and the Amermican
Health Care Association recommend that you pay special attention to the
following features.
Long-Term Care Insurance - Company Reputation and Legitimacy
Make sure the insurance companies under consideration are licensed in
your state and that they carry favorable financial ratings from
well-known ratings agencies such as A.M. Best Company, Duff amp; Phelps,
Inc., Standard & Poor's Insurance Rating Services, and Moody's
Investor Services, Inc.
Long-Term Care Insurance - Coverage Parameters.
Policies will differ in the types of services they support. Some
cover nursing home care, others cover custodial or personal care in a
variety of settings such as assisted living, adult day care, and home
health care. Some include a combination of services. Be sure to choose a
policy that best meets your particular needs.
Long-Term Care Insurance - Benefits Payout.
How much does the policy pay per day for care in a particular setting
(e.g., nursing home, assisted living)? How does the policy pay out
services (e.g., a fixed daily amount, as reimbursement for the cost of
care up to a daily maximum)? Does the policy have a maximum lifetime
limit? If so, what is it for nursing home care? Home health care?
Long-Term Care Insurance - Waiting Period.
How long must the insured wait before he or she can begin receiving
benefits? Most policies range from zero to 180 days. Typically the
longer the period, the lower the cost of the policy.
Long-Term Care Insurance - Eligibility.
Does the policy use certain benefit triggers to determine when you
will be eligible to receive benefits? Such triggers could include
activities of daily living that the insured needs help with, such as
bathing, eating, and dressing; cognitive impairment, such as Alzheimer's
disease; or a prerequisite hospital stay for nursing home benefits.
Long-Term Care Insurance - Benefits Protection.
The policy should include an inflation adjustment feature to ensure
that benefits stay in line with rising care costs. Determine what the
rate of increase is, how often it is applied, and for how long.
Additional protections include a "guaranteed renewable"
clause, which states that the policy cannot be canceled when you get
older or if you suffer physical or mental deterioration, and a
nonforfeiture benefit, which ensures that some portion of your benefits
are still available to you if you cancel your policy or unintentionally
let it lapse.
Long-Term Care Insurance- Tax Implications.
Most long-term care policies sold today are
federally tax-qualified, which means premiums paid, as well as
out-of-pocket expenses for long-term care, can be applied toward
the 7.5% medical expense deductions contained in the federal tax
code. Additionally, long-term care benefits received are not taxed
as income up to certain limits. Consult with a tax advisor to
learn more about the tax implications of long-term care
insurance.
Because of the many variables involved in determining whether long-term
care coverage is right for you, it is important to do your research.
Luckily there is a wealth of information available to consumers on
long-term care and related health care issues.
Sponsored
Links
|
