Long Term Care

What you need to know

As more and more Americans are reaching retirement, many are choosing to purchase long-term care insurance. Long-term care insurance helps to provide financial support in the event that you should become disabled by illness or accident, and are thus unable to perform the basic activities of day to day life, otherwise known as ADLs.

When looking for a long-term care policy it is important to find one which includes the following features:

Maximum periodic benefits. The total amount of benefits the insurer pays to the policyholder during a prescribed period is referred to as maximum periodic benefits.

Maximum lifetime benefits. Similarly, the maximum amount of benefits an insurer pays over the lifetime of the insured is referred to as the maximum lifetime benefits.

Applicable services. It is also important to always check and see what level of care your policy is providing. While some policies pay for skilled care, there are other policies that also pay benefits for personal care.

Applicable points of service. Policies differ in what sort of care they provide. Some policies pay for care only in licensed facilities while others may also pay for care out of the home.

Inflation protection. Policies with inflation-protected features will help to guard against unanticipated health care cost increases—health care costs tend to rise at an even faster rate than general inflation.

Cost of premiums. Long-term care can often cost thousands of dollars a year in premiums. To minimize the cost you may want to buy a minimum amount of coverage, and at a younger age. The National Association of Insurance Commissions (NAIC) has stated that long-term care insurance premiums cost more than twice what they do at age 50 at age 65. When a potential policyholder turns 79, the premium costs close to ten times as much as it would for a 50-year-old person.

For those living entirely off Social Security, the Medicaid program for long-term care may be an option. To find out if you qualify, you must pass a means test.

Life insurance companies also offer individual long-term care policies, and some employers may even offer a group policy. One benefit of the group policy option is that you are less likely to have to fill out a lengthy health condition questionnaire.

The following points may be helpful to keep in mind when looking into long-term care:

Tax Deductibility. A portion of your premiums can be added to your medical expenses, and medical expenses that exceed 7.5% of your adjusted gross income are tax-deductible. The portion of your premiums that can be considered medical expenses depends on your age.

Medicare and health insurers don’t pay. According to the NAIC, Medicare, Medigap insurance, and private health-insurance plans don’t usually pay for long-term care.

Pre-existing conditions and exemptions. It may be necessary for you to determine if a potential insurer issues policies to individuals with pre-existing medical conditions. Some insurance companies will not issue you a policy if you fall into this category. It may also be helpful to see whether or not the policy covers Alzheimer’s disease, as some insurers exclude this condition from their coverage.

Health questionnaires. It is extremely important that you answer the health condition questionnaires as truthfully as possible. Should a discrepancy arise between your description of a pre-existing condition and the reality of that condition, your insurer may have the right to cancel the policy. Vargus & Associates is pleased to offer a free long term care consultation. Contact us for an appointment.