Long Term Care insurance is becoming increasingly valuable. Following is an overview of the types of insurance available, as well as the services offered. The most effective time to purchase this insurance, as well as those who benefit most from being insured, will be discussed.
This coverage helps cover the expense of care for an extended period. The beneficiary can be virtually any age, and does not have to be “sick” in the clinical sense. This is simply someone who cannot carry out at least two necessary daily activities. These may include eating, dressing, toileting, bathing and walking. The services provided are not made available by Medicare or Medicaid.
Two general types of policies exist. The first is “tax-qualified”, which is more common. The beneficiary must be unable to perform at least two normal daily living activities. The second is “non-tax qualified”. This plan actually requires the benefit recipient to be unable to perform only one activity of daily living. Tax-qualified policies are more prevalent, because people want to be able to deduct premiums from their taxes. However, these tax issues can be complex. Individuals should seek advice of knowledgeable tax professionals before choosing a type of policy, since non-tax qualified plans provide better benefits. Group policies through one’s employer do exist, but may or may not be tax-qualified, and can be canceled by the insurance company.
Those who do not want to, or cannot, rely on family members for assistance, usually want to purchase some type of coverage. Benefits include adult day care, home care, assisted living, hospice and Alzheimer’s's facilities. These plans also cover the cost of a live-in caregiver, whether a registered nurse, therapist, or companion. Most benefits are paid by reimbursing the individual. Rates are determined by a few major issues: age and health status of the beneficiary at the time the plan is purchased, the length of the waiting period before plan benefits begin, and any inflation protection that may be provided.
This coverage is effective because it pays for services that are not provided by Medicare and Medicaid. These government benefits either give only short term and partial home and nursing facility care, or the beneficiary’s assets must be used up before benefits kick in. Private coverage for extended care pays for home health care, which averages almost $30 per hour, and assisted living facility residence which costs approximately $3000 per month.
Most financial planners recommend the best time to purchase this insurance is when a person is in his or her mid-fifties. Premiums are less expensive if bought at a younger age, but if purchased too soon, the amount of premiums paid outweighs the benefits derived. If one obtains insurance at a later age, then premiums are very costly. Individuals should actually self-insure if their net worth, excluding housing, exceeds $2 million. If net assets are below $200,000, then one probably cannot afford the premiums. An individual is a prime candidate for Long Term Care insurance if his or her net worth is between these two numbers.
People are living longer, with more disabilities than before. The question of Long Term Care insurance should be part of retirement planning. While premiums can be costly, these payments can be far less than actual health and long term care costs. Those who purchase these policies have peace of mind that their needs will be met, while other assets are protected.
For more information on how Long Term Care Insurance can help prepare us as we age. Also you can get a long term care insurance quote. We represent 20 of the top LTCi providers. This gives you tremendous options.
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