Long Term Care Insurance
What is long-term care insurance?
These are individual insurance policies that may help you when you
are unable to take care of yourself due to prolonged illness or disability.
This policy usually pays for skilled, intermediate and custodial care
in a nursing home. Home health care, adult day care, and assisted living
care are also often covered. These policies usually pay a fixed amount
per day or per visit to facilities or caregivers that are licensed by
the state and/or participate in Medicaid and Medicare.
What is the difference between a tax-qualified and a non tax-qualified
Benefits paid by a tax-qualified long-term care plan generally are
not taxable as income. Benefits from a non tax-qualified long-term care
plan may be taxable as income. Check with your tax advisor about the
possibility of deducting a portion of the premiums paid in addition to
the individual tax consequences involved.
Does Medicare Pay for Long-Term Care?
Not really. Medicare will pay for some home health care and skilled
nursing facility care following a hospital stay – as continuing
care. It does not pay for nursing home care or longer-term home care.
Does Medicaid Pay for Long-Term Care?
Yes, but you must meet very low income and asset requirements to qualify
for Medicaid. Contact your State for more information.
10 Things You Should Know About Buying Long-Term Care Insurance
- Long-Term Care is Different From Traditional Medical Care
Someone with a prolonged physical illness, a disability or
a cognitive impairment such as Alzheimer’s disease often needs
long-term care. Long-term care services may include help with daily
activities, home health care, respite care, hospice care, adult day
care, care in a nursing home or care in an assisted living facility.
- Long-Term Care Can be Expensive
The cost depends on the amount and type of care you need and
where you get it. In 2001, the national average cost of nursing home
care was $56,000 per year, assisted living facilities reported $22,476
per year and home care costs ranged from $12,000 to $16,000 per year.
- You Have Options When Paying for Long-Term Care
People pay for long-term care in a variety of ways. These
include using personal resources, long-term care insurance and Medicaid
for those who qualify. Medicare, Medicare supplement insurance and
health insurance you may have at work usually will not pay for long-term
care. Long-term care insurance will pay for some or all of your long-term
- Decide Whether Long-Term Care Insurance is for You
Whether you should buy a long-term care insurance policy will
depend on your age, health status overall retirement goals, income
and assets. For instance, if your only source of income is a Social
Security benefit or Supplemental Security Income (SSI), you probably
should not buy long-term care insurance since you may not be able to
afford the premium. On the other hand, if you have a large amount of
assets but do not want to use them to pay for long-term care, you may
want to buy a long-term care insurance policy. Many people buy a policy
because they want to stay independent of government aid or the help
of family. They don’t want to burden anyone with having to care
for them. However, you should not buy a policy if you can’t afford
the premium or are not sure you can pay the premium for the rest of
- Pre-Existing Condition Limitations
A long-term care insurance policy usually defines a pre-existing
condition as one for which you received medical advice or treatment
or had symptoms within a certain period before you applied for the
policy. Some companies look further back in time than others. Many
companies will sell a policy to someone with a pre-existing condition.
However, the company may not pay benefits for long-term care related
to that condition for a period after the policy goes into effect, usually
six months. Some companies have longer pre-existing condition periods
or none at all.
- Know Where to Look for Long-Term Care Insurance
Long-term care insurance is available to you in several different
forms. You can buy an individual policy from a private insurance company
or agent, or you can buy coverage under a group policy through an employer
or association membership. The federal government and several state
governments offer long-term care insurance coverage to their employees,
retirees and their families. You can also get long-term care benefits
through a life insurance policy. Some states have long-term care insurance
programs designed to help people with the financial impact of spending
down to meet Medicaid eligibility standards. Check with your state
insurance department or counseling program to see if these policies
are available in your state.
- Check With Several Companies and Agents
Contact several companies and agents before you buy a long-term
care policy. Be sure to compare benefits, the types of facilities covered,
limits on your coverage, what is not covered and the premium. Policies
from different insurance companies often have the same coverage and
benefits but may not cost the same. Be sure to ask companies about
their rate increase history and whether they have increased the rates
on the long-term care insurance policies.
- Don’t be Misled by Advertising
Most celebrity endorsers are professional actors paid to advertise,
not insurance experts. It is also important to note that Medicare does
not endorse or sell long-term care insurance policies, so be wary of
advertising that suggests Medicare is involved. Do not trust cards
you get in the mail that look like official government documents until
you check with the government agency identified on the card.
- Make Sure the Insurance Company is Reputable
To help you find out if an insurance company is reliable, you can take
the following actions: Stop before you sign anything, call your state
insurance department and confirm that the insurance company is licensed
to do business in your state. After you make sure they are licensed,
check the financial stability of the company by checking their ratings.
You can get ratings from some insurer rating services for free at
most public libraries.
- Review Your Contract Carefully
When you purchase long-term care insurance, your company should
send you a policy. You should read the policy and make certain you
understand its contents. If you have questions about your insurance
policy, contact your insurance agent for clarification. If you still
have questions, turn to your state insurance department or insurance
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