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Long-term Care Insurance Policies

Long-term care is something we hope neither we nor our loved ones would ever need. Still, the truth is that extended care can be required by any person at any age. No one is impervious to illness or injury. And as we grow older, we are also prone to health issues and frailty of old age.

Though it may be difficult to predict who will need long-term care, i.e. assistance to perform everyday functions, the studies and statistics show that the likelihood of needing such extended care is quite high. More than half of all women and a third of all men are likely to need long-term care.

There are a number of options you can use to be able to fund long-term care costs: your savings and investments, your Life Insurance policy, a "reverse mortgage" or equity in your home. They all have their advantages and drawbacks, and it depends upon your particular situation whether this or that option will work for you. Long-term Care Insurance is the option which should be seriously considered if you know that the above-mentioned alternatives are not for you, or you need to compare all the options.

Like with any insurance product, Long-term Care Insurance should be purchased before the insured actually requires the medical and nursing services covered under the policy. Therefore, experts recommend that individuals who are edging 50-65, should consider purchasing Long-term Care Insurance, as they are still healthy enough to qualify and are more likely to benefit from the purchase of a policy.

Long-term Care Insurance coverage is not only necessary if you want to make sure that you will receive the care services that you want. It also helps gain control over your income and assets, as well as gives a sense of security. This is the right insurance product for anyone who needs to protect their assets and is not wealthy enough to pay long-term care expenses using their own savings.

Some employers provide Long-term Care Insurance for their employees, and you may already be covered under an employer-sponsored policy. If it is not the case, you may need to purchase a separate long-term care policy.

Before you purchase Long-term Care Insurance, thoroughly study what the policy covers. Consider the following features of the policy before you make your final decision:

— Coverage, i.e. the amount of expenses the policy benefits provide. As many policies pay up to a certain amount per day, it may affect your choices, for example, as to whether you will give preference to a long-term care policy that pays for in-home care only or for a care in a professionally-run facility. Mind that higher coverage typically means that you will have to pay a higher premium, and additional coverage involves additional premiums too. There is also an option to buy coverage for a mixture of long-term care types, for instance, a nursing home, assisted living, and adult day care. In case the cost of care turns out to be more than the daily or monthly benefit your policy provides, the balance will have to be paid out of your own pocket.

— Period of Coverage. Make sure your coverage extends to a period of years during which you want to receive benefits from your policy. The average nursing home stay is 2 and a half years, however you can insure for a longer stay, taking the longest benefit you can afford. Basically, you have options spanning from two to six years, or you may want to be covered for the rest of your life.

— Elimination Period. The waiting period is closely connected with your premiums: the longer it is the lower insurance premiums are. During the elimination period, which could last up to 100 days, you have to pay all of your long-term care expenses yourself. You are recommended to choose a 30-day elimination period, since longer waiting periods might cost you less in premiums, but with inflation, will add up the costs to quite a sizeable sum.

— Inflation Protection. With the health care costs rising every year considerably, it is important to make sure your policy includes an inflation protection feature. Though this option will make you pay more in premiums, purchasing a policy without inflation protection will probably mean insufficient coverage. The inflation protection ensures that premiums do not increase, or, in case the cost of long-term care increases, it limits the rate at which the premiums may increase. The basic options of inflation protection are the right to add coverage at a later date and automatic coverage increases. In order to catch up with estimated inflation in the long-term care costs, an inflation adjustment option increases the dollar value of your benefit by 5% each policy year. Consult with your insurer about the kinds of inflation adjustment available and choose the option which better suits you.

Choosing the right Long-term Care Insurance policy may be quite a difficult task. Different policies may offer different benefits, terms, and features. Even the definition of disability may vary among plans. Therefore, it is very important to carefully consider all crucial factors and details prior to purchasing the policy.

It is vitally important to choose the right insurance company. When we are speaking of the right insurer, we mean the financial strength of the company above all other aspects. A solid "A" rated company which has been in this market for many years already and that will continue to be in business for many years to come is more likely to keep your premiums stable and provide you with good service when necessary.

Make sure that your long-term care policy states when you will be eligible for coverage, and how exactly your eligibility will be determined. Who determines eligibility: your own doctor, or the insurance company's representative? In most cases, an insured individual becomes eligible for benefits of the long-term care policy when he/she needs help with two or more activities of daily living, i.e. eating, dressing, bathing, using the toilet, continence, and walking.

Make sure that an insurance company cannot cancel your policy due to bad health. Make certain that the policy does not require that an insured individual spends time in a hospital before receiving benefit; that your policy will be renewed as long as you pay the premiums; that there is one deductible for the life of the policy; that the policy allows you to stop paying premiums as soon as you start receiving benefits; and you will be able to downgrade your coverage in case you cannot afford the premiums. Also your long-term care policy should automatically cover pre-existing conditions if you disclosed them at the time of your application, provide at least one year of nursing care and home health care coverage and include coverage for dementia.

Your policy should also have a "free look" clause, which means that it allows you to cancel a policy for any reason within a certain number of days after the purchase and get a refund. Find out how many days you would have to change your mind.

You are advised to call nursing homes in the area where you are likely to be living to check if the benefit amount you can receive if you buy the policy will cover the charges of the nursing homes.

Consider some additional options your policy may have, such as a non-forfeiture benefit. This benefit implies that a policy will keep on paying for your care even in case you stop paying premiums. Mind that a non-forfeiture benefit can considerably add up to the total price of your premium.

As for the total price of the Long-term Care Insurance, it largely depends on the individual's current age, the amount of coverage he/she wants, the range of options he/she selects, and the carrier.

There are long-term care policies which are qualified for tax purposes. In case the policy is tax-qualified, the covered person can deduct his/her premiums up to a maximum limit. The amount of the deduction depends on the age of the person, and you may be able to deduct only a small portion since the amount is deductible only to the extent that it exceeds the federal government's 7.5 % threshold of adjusted gross income. A tax-qualified policy implies that a person needs care for at least 90 days, and is unable to perform 2 or more activities of daily living without assistance; or needs assistance due to a severe cognitive impairment. Benefits from a tax-qualified policy are non-taxable.

Non-tax qualified policies often include a "medical necessity trigger," which means that the patient's doctor, or the doctor in association with the insurance company's representative can state whether the patient requires long-term care for any medical reason. Those who receive benefits under a non-qualified long-term care insurance policy may have to pay quite a large tax bill for these benefits.

At some point of our life, we all tend to think about the old age and start planning for the expenses of our final years. It is very difficult to predict anything in life, though we all strive for stability and anticipate things to fit into our plans. Long-term Care Insurance is one of the important options worth considering, as it brings the needed stability and peace of mind.