Q & A

What are the main advantages of having long term care insurance?

  1. It protects your family’s lifestyle
  2. It provides you with the freedom to choose where you want to receive care. 
  3. It protects your spouse and children from the emotional, physical and financial consequences that caring for you would cause.

 I’m really a healthy person…Why would I need long term care insurance?

At least  half of all Americans will need long term care at some point in their lives. One in five over the age of 50 is at high risk of needing long term care within the next twelve months.  Consumer Information About Long Term Care-American Health Association, 2002

Having good health today does not mean things cannot change.  If you wait until this happens, you may not be able to get insurance at any price.  You and your loved ones could be faced with huge medical bills and the prospect of paying them all yourself.

 I already have health insurance…Why would I need long term care insurance, too?

Health insurance and long term care insurance ARE NOT THE SAME THING!  Health insurance usually pays for the cost of injuries and illness.  Health insurance covers lab tests, hospitalization, and doctor visits.  Medicare is very similar.

Long term care insurance is designed to cover ongoing care and services needed for those unable to care for themselves.  Long term care is needed for physical or mental limitations and difficulties.  This care may be Skilled Care or more often Custodial (Personal) Care.  Personal Care is needed to help someone with their daily activities – getting dressed, eating, bathing, etc.

What’s the difference between long-term dissability insurance and long-term care insurance?

Long-term dissability insurance will pay you a portion of your ordinary salary, usually up to 60% of your pay.  This will provide you with a portion of your income to pay for your ordinary expenses which do not decrease because you are not working.  Long-term care insurance pays for the additional custodial care that you will need in order for you to safety live in the community.

What is the risk of doing without long term care insurance?

Many times, once people begin paying for a stay in an LTC facility, they find their savings are not sufficient to pay for a lengthy time.  A Guide to Long Term Care Insurance- Health Insurance Association of America 2002-03

Not preparing for the cost of paying for a nursing facility or other types of long term care is the LEADING reason for the loss of financial security among retired persons. Long Term Care Insurance: Debunking the Myths, American Health Care Association, April 2001

Long term care insurance helps protect your nest egg, your lifestyle, and ensures your continuing financial security.

What are the odds of this happening to me?

  1. It won’t happen to you.  No one expects that they will need long-term care.  However, for those people who love their family, never needing long-term care is too great a risk when they honestly consider the potential emotional, physical and financial consequences that this event could have on their loved ones. 
  2. When compared with the potential of making a claim on your homeowner’s policy due to fire (1 in 1200); or of using your auto insurance (1 in 240); the potential risk of needing long term care is close to 1 in 2! Why you Need Long Term Care Insurance- Kiplinger, Back to Basics, September 2002

How does long term care insurance protect me?

It is specifically designed to pay for long term care services.  It helps cover nursing home care, in-home care, community-based care such as adult day care, and assisted living care.  It usually pays the actual charges for covered care upto a daily maximum dollar amount.  Coverage can last for a period of years or until a maximum daily and maximum dollar amount if reached.  (You can choose the maximum daily and maximum total amounts when you purchase policy).

Indiana Long Term Care Insurance Program, Office of Medicaid Policy and Planning

When is long term care insurance not the right option for me?

  1. If you have little or no assets.  At a minimum, your assets should be equal to the cost of one year in a nursing home (about $75,000).
  2. If you are already disabled or have a serious health problem which puts you at high risk for needing long term care.  In these instances, you will probably not be able to pass the underwriting required by the insurer to obtain coverage.
  3. If you have limited ability to pay premiums.  Paying premiums should not cause you to deny yourself essentials like food, shelter, utilities, or medicine.

Just how expensive is long term care?  Is my retirement secure?

As a national average, one year in a private room in a nursing home is bout $70,080.  In some areas, it can be twice that amount.  Assuming a 5% annual inflation, these numbers will increase over 250% in the next 20 years. Met Life Market Survey of Nursing Home and Home Care Costs, 2004

The national average hourly rate for a Home Health Care Aide to assist with getting dressed, bathing, meal preparation, and similar household tasks is $18 per hour.  If skilled help such as a physical therapist is needed, the costs can be much higher. Met Life Market Survey of Nursing Home and Home Care Costs, 2004

Long term care insurance is an essential part of your retirement plans but deciding on options when purchasing long term care insurance can be daunting.  Your agent can help you choose the perfect plan for your needs.

It is your agent’s job to research the growing number of insurers and the LTC products they offer.  This research saves you time and the hassle of shopping for long term care insurance by yourself.  Contact a professional to design a plan to help protect your assets and income.

Am I too young to be thinking about purchasing long term care insurance?

Many people who truly intend to purchase long term care insurance put it off from year to year.  They wait until they’re a little bit older before deciding to buy.  The decision to wait may be costly!  Like most insurance, premiums for LTC are based on how old you are when you apply – the older you are when you sign your application, the higher your premiums will always be.

The need for long term care can come at any age, no matter what your health status.  40% of the 13 million Americans receiving long term care services are between the ages of 18 and 64 (prime working years).

Remember, the information you give on your application is based on your PAST HISTORY up to the time you apply for coverage.  If your health changes, or you have an accident…you could become uninsurable. An Employer’s Guide to Long Term Care Insurance – Health Association of America, 2002.

The younger you are, the lower your premium!  It’s always best to apply for long term care insurance while you are in good health.

Can I fit the cost of long term care insurance into my budget?

It’s always easier to budget to set monthly amount than to be hit with large or unexpected expenses.  Health insurance is designed to protect you from incurring excessive medical bills.  It protects you from having to reach deep into your pockets or depleting your hard-earned savings to pay the bills.  Most people choose not to gamble when it comes to having health insurance.

The same path of reasoning is true for long term care.  If something happened to you and you needed to be cared for a long period of time, the retirement savings or money you hoped to leave your children, might have to go to pay bills instead.

 

Legislation

 

The Federal Government and several state governments provide tax advantages for those who purchase long term care insurance (LTCI).  Please note however, that regulations and laws change frequently and it is best to speak with a licensed tax consultant for expert advice on tax matters.

Brief Overview of Health Insurance Portability and Accountability Act of 1996 (HIPAA):

In 1996, Congress passed the HIPAA, which provides, in part, the criteria for establishing Tax-Qualified Long Term Care Insurance Policies (TQLTCIP).  Basically, HIPAA provides that benefits paid under a long term care insurance policy will not be taxable if the LTCI policy meets minimum eligibility requirements.  As a result of HIPAA, it is easy to tell which LTCI policies are tax-qualified.  There will be an indentifying paragraph on the front page of the policy or contract.

HIPAA may provide a tax incentive for individuals to take financial responsibility for their LTC needs.

  • Both the employees and the employer can make premium contributions.  There are no limits on the amount an employer may contribute in the form of LTC insurance premiums.  These premium contributions are treated as medical expenses and may be tax deductible to the employer.
  • Premiums paid by the employer on behalf of an employee generally may be excluded from the employee’s gross income.
  • Benefits paid to an employee through a tax-qualified LTC policy could be excluded from their gross income.
  • Premium contributions made by an employee may be deductible for individuals if itemized medical expenses exceed 7.5% of their adjusted gross income.
  • Premiums for LTC can be an acceptable expenditure for the new medical savings accounts that are available to self-employed and small businesses with fewer than 50 employees.
  • Premium contributions for LTC insurance may be tax deductible by a self-employed individual, subject to the limits on deductions for health insurance by the self-employed.

Won’t Medicare pay my long term care costs?

Medicare wasn’t designed to pay for long term care.  Strict criteria must be met to qualify for Medicare coverage for this type of care.  Even when you meet Medicare’s criteria, the coverage it provides is for a limited length of time (approximately three months in a nursing home).  Those who believe Medicare will pay their long term care expenses may end up unexpectedly spending their life savings on long term care costs.

 

Will Medicaid help me?

Medicaid is the government program that helps with medical expenses for the poor.  Prior to even being considered for assistance under the Medicaid program, the patient is first required to spend down nearly all financial assets.  Once the financial assets have been depleted, the state may require the sale of personal assets to pay the continuing costs of nursing home care. Personal assets include vehicles, property, business assets, and even the patient’s house if the stay in the nursing home lasts more than six months, and the spouse or a dependent child is not living at home.

My Financial Planner said that I can self-insure?

If you have put a retirement plan in place, the costs associated with providing you with long-term care could dissrupt that plan in a number of ways.  Some of the consequences may include the erosion of your principle that you had intended to provide you and your spouse with a certain income.  Monies in a trust that you had set up to protect certain assets may be used to  pay for your care at home when loved ones choose to use available money to keep you at home.   There cane be significant tax consequences connected with liquidating certain qualified or non-qualified assets.