Long-Term Care Insurance
Long-term care insurance (LTC or LTCI), helps provide for the cost of long-term care beyond a predetermined period. Long-term care insurance covers care generally not covered by regular health insurance plans.
Individuals who require long-term care are generally not sick in the traditional sense, but instead, are unable to perform basic daily activities such as dressing, bathing, eating, toileting, continence, transferring (getting in and out of a bed or chair), and walking. Age is not a determining factor in needing long-term care. About 60 percent of individuals over age 65 will require at least some type of long-term care services during their lifetime. About 40% of those receiving long-term care today are between 18 and 64. Once a change of health occurs long-term care insurance may not be available.
Long-term care insurance generally covers home care, assisted living, adult daycare, respite care, hospice care, nursing home and Alzheimer facilities. If home care coverage is purchased, long-term care insurance can pay for home care, often from the first day it is needed. It will pay for a visiting or live-in caregiver, companion, housekeeper, therapist or private duty nurse up to 7 days a week, 24 hours a day (up to the policy benefit maximum).
Other benefits of long-term care insurance:
- Long-term care insurance could help cover personal, out-of-pocket expenses and deter from individuals having to rely on their children or family members for financial support. Without long-term care insurance, the cost of providing these services may quickly deplete the savings of the individual and/or their family.
- Premiums paid on a long-term care insurance product may be eligible for an income tax deduction. The amount of the deduction depends on the age of the covered person. Benefits paid from a long-term care contract are generally excluded from income.
- Business deductions of premiums are determined by the type of business. Generally corporations paying premiums for an employee are 100% deductible if not included in employee’s taxable income.
Types of Policies
Private long-term care (LTC) insurance is growing in popularity. Although premiums have remained relatively stable in recent years, coverage costs can be expensive, especially when consumers wait until retirement age to purchase LTC coverage.
- Tax qualified (TQ) policies are the most common policies offered. A TQ policy requires that a person 1) be expected to require care for at least 90 days, and be unable to perform 2 or more daily activities (eating, dressing, bathing, transferring, toileting, continence) without substantial assistance (hands on or standby); or 2) for at least 90 days, need substantial assistance due to a severe cognitive impairment. In either case a doctor must provide a plan of care. Benefits from a TQ policy are non-taxable.
- Non-tax qualified (NTQ) often includes a “trigger” called a “medical necessity” trigger. This means that the patient’s own doctor, or that doctor in conjunction with someone from the insurance company, can state that the patient needs care for any medical reason and the policy will pay. NTQ policies include walking as an activity of daily living and usually only require the inability to perform 1 or more activity of daily living.