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Do I Need Long Term Care Insurance?

Written by Linda Rey on January 27, 2011 in Insurance  |   3 comments

Do I Need Long Term Care Insurance? Most people don’t like to spend money on insurance unless they see a real benefit. Let’s say a few of the benefits included: Receiving tax-free money when you get sick Avoiding depleting your life savings on medical expenses…

Do I Need Long Term Care Insurance?

Most people don’t like to spend money on insurance unless they see a real benefit. Let’s say a few of the benefits included:

  • Receiving tax-free money when you get sick
  • Avoiding depleting your life savings on medical expenses
  • Claiming tax deductions on premiums paid
  • Preserving your dignity
  • Saving family members the burden of your care

Convinced yet? Let’s talk about long-term care insurance.
Long-term care includes skilled care and/or personal care you may need at home, in respite care, hospice care, adult day care, a nursing home, or an assisted-living facility. The policy claims are available when you are unable to perform two of the six activities of daily living, known as ADLs (transferring, bathing, toileting, dressing, eating, and continence).

Here’s the basic construction of a long-term care insurance policy:

  • Daily or monthly benefit: Amount of money paid to you
  • Benefit period: How long the benefit is paid to you
  • Elimination period: Similar to a deductible, but in the number of days you would be self-insured
  • Inflation-protection rider: Because $100 today is not worth $100 in twenty years
  • Tax-qualified vs. non-tax-qualified: Today, most are tax-qualified, meaning a tax deduction is allowed at purchase, and the benefits are not taxable.

When do you need long-term care insurance? If you:

  • Want to protect your assets and income, especially if they are significant
  • Can pay the premium without straining your monthly budget
  • Prefer flexibility in choosing where you receive care
  • Would rather not rely on family members to care for you during a difficult time of need

Long-term care insurance is not always the right choice. You might not need long-term care insurance if you:

  • Have limited assets
  • Can’t support the premiums on your income, especially if Social Security is your only income and you have trouble paying for basic necessities
  • Are eligible for and receiving Medicaid

The cost of long-term care insurance can vary greatly from city to city and state to state. Check out this “Cost of Care” map from the Life and Health Insurance Foundation for Education to see costs for your part of the country.

If you’ve decided that long-term care insurance is right for you, you have some options for providers:

  • Private, individual policies
  • Employer-sponsored group coverage
  • Medicaid: You must be approved in order to qualify for eligibility per your state.
  • Medicare: This is very limited.
  • Partnership policies: These were started in the 1980s in California, Connecticut, Indiana, and New York to encourage people who would normally need to rely on Medicaid to look for other options for long-term care.

Unfortunately, because long-term care policies are also underwritten based on age and health, providers evaluate you according to your health history. If you have a preexisting condition, such as Alzheimer’s disease, it is highly unlikely that you will be able to secure a long-term care insurance policy. In addition to taking into consideration your health concerns, you need to figure out if long-term care insurance is the right fit for your financial portfolio. Long-term care insurance is not for everyone.

Buying long-term care insurance is a big decision that requires forethought, analysis, and planning. Consult with your adviser on how you should proceed to protect your health, your assets, and your loved ones.

Linda Rey is a licensed insurance agent at Rey Insurance with a broad spectrum of expertise in life, accident, health, property and casualty insurance as well as retirement planning and college funding strategies.

Follow Linda on Twitter.

READ MORE:
Evaluating Your Insurance Needs on a Tight Budget
Laddering Insurance Policies
Emergency Essentials: Preparing Your Paperwork and Personal Information for an Emergency
Road Warrior Tips: How to Handle an Accident When Traveling on Business

3 comments

  1. ltcshop.com says:

    Now that 40 states have "LTC Partnership programs" you do not have to buy an "unlimited" long-term care insurance policy.

    You only need to buy an amount of long-term care insurance equal to the amount of assets you want to protect for yourself, your spouse or partner, and/or your heirs.

    The Long-Term Care Partnership programs provide dollar-for-dollar asset protection. Each dollar that your partnership policy pays out in benefits entitles you to keep a dollar of your assets if you ever need to apply for Medicaid services.

    Four states have successfully run LTC Partnership programs for years, namely, California, Connecticut, Indiana and New York. 36 other states have implemented similar programs since the passage of the Deficit Reduction Act in 2005.

    Here’s a link to a more detailed explanation:

    http://bit.ly/How-Partnership-Policies-Protect-Assets

  2. john ronnie says:

    It depends on the situation. Long Term Care Insurance is not applicable for all. Thank you for sharing an interesting article.

    Long Term Care Insurance Alabama

  3. Editor, Equifax Personal Finance Blog says:

    From Diane at ActiveRain:

    There are some very good plans out there even available for those with pre-exisitng conditions.

    http://activerain.com/blogsview/2102085/do-you-need-long-term-care-insurance-


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