Long term care insurance is designed to cover long term care services in a variety of settings such as in your home, in a community organization, or in another facility. Long term care insurance can help ensure that financial resources and support are in place when you need them, and long term care insurance can prevent you from depleting your savings and other resources to pay for a long term care event.
If you apply for coverage and you are approved, a long term care insurance policy will be issued to you. Provided that you pay your premiums, the policy will remain in force. Should you have a long term care event and you meet the insurance carrier's criteria for benefit payment, you will be reimbursed for covered long term care services up to the limits of your policy.
While some plans only pay for facility care at a nursing home or assisted living facility, your group plan will provide for comprehensive coverage, regardless of whether you receive long term care at home, in an assisted living facility, or in a nursing home. Additionally, your group plan can also cover approved care provided at home by informal caregivers. Friends, family members and other non-licensed caregivers can qualify as informal caregivers whose care would be covered under your group plan.
Most health plans and Medicare provide either no coverage or limited coverage for a long term care event. In fact, most health plans normally do not cover ongoing chronic care. An extended stay in an assisted living facility or nursing home, or a continuing need for a home health aide would likely not be covered by your health plan.
Medicare also does not cover most long term care services. Medicare will only pay limited amounts for skilled care following a hospital stay. Long term care insurance helps to cover the long term care expenses that would not otherwise be covered by your health plan or by Medicare.
Long term care insurance is a smart choice for many people. You should consider long term care insurance if you have assets and/or income that you want to protect. Long term care insurance may also be appropriate if you want to choose where to receive long term care and/or if you do not want to burden your family with caring for you.
Everyone's situation is unique, so there is no universal coverage amount that fits everyone. In terms of determining how much coverage is right for you, there are several factors that you should consider:
Due to the enactment of the Health Insurance Portability and Accountability Act (HIPAA) in 1996, long term care insurance policies must meet certain standards in order to receive favorable tax benefits.
If your long term care insurance plan achieves tax-qualified status, the benefits that you receive are not considered taxable income and you can deduct long term care insurance premiums as medical expenses to the extent that your total qualified medical expenses exceed 10% of your annual adjusted gross income. If you are age 65 or older, the threshold is 7.5%.
The amount of long term care insurance premiums that you can include in your total medical expenses is subject to Internal Revenue Service (IRS) limits by age. Below are the current IRS limits by age:
|Your age in years,
attained before the
close of the taxable year
|Maximum long term care
insurance premiums you
can include: tax year 2013
|Maximum long term care
insurance premiums you
can include: tax year 2014
|Age 40 or younger
|Age 41 to 50
|Age 51 to 60
|Age 61 to 70
|Age 71 or over
Long term care benefits are payable under a tax-qualified plan when a licensed health care practitioner certifies that you are unable to perform at least two activities of daily living without substantial assistance for a period expected to last at least 90 days. Benefit eligibility is also triggered if you require substantial supervision to protect yourself due to a severe cognitive impairment like Alzheimer's disease.
Inflation protection is available on most long term care insurance plans. One of the most common options is automatic compound protection, where your benefit increases each year. Another common inflation protection option is the future purchase option, wherein you have the ability to add more coverage without any further underwriting. Other inflation protection options are available. Check with one of our licensed long term care insurance specialists to learn more.
A plan of care is the list of long term care services and individual care that you need. Plans of care are typically developed by your care coordinator or other licensed health care practitioner. Plans of care are created in conjunction with you and/or your family.
Many long term care insurance plans will continuously monitor and reassess your plan of care to ensure that it continues to meet your specific needs. Plans of care can be adjusted as needed to ensure that you are receiving the very best care options.
There are a multitude of additional services available in the community to help you meet your unique long term care needs. Your plan of care will address which of these services are best suited to your individual needs. Community-based services include friendly visitor programs, home-delivered meals, and chore services. These additional services may be reimbursed by long term care insurance.
Under certain circumstances, care coordinators can authorize benefits for services and care that are not specifically defined as covered services. The services are generally classified as alternative care.
Long term care insurance often contains a waiver of premium feature which allows you to stop paying your premiums once you are eligible for benefits. You will normally resume paying your premiums if you recover and benefits stop.
As with most other types of insurance coverage, if you stop paying your long term care insurance premiums, your policy will most likely be canceled. There are some plans that offer a non-forfeiture benefit that provides protection if you cancel your coverage. Non-forfeiture provides limited benefits that are typically based on the amount of time that you have had the coverage and the amount of premium payments that you have paid.
Other plans offer a contingent non-forfeiture benefit. This benefit provides protection if you are no longer able to pay premiums due to a premium increase to a certain level.
Tax-qualified long term care insurance plans must be guaranteed renewable, which means that your coverage cannot be canceled as long as you pay your premiums. Additionally, your coverage is portable, meaning that once your coverage is effective, even if you are no longer a member of an eligible group, you can keep your coverage for as long as you continue to pay your premiums and so long as you have not used up your maximum lifetime benefit.
Most health plans are intended to cover skilled, short term medical care as you recover from an illness or injury. Health insurance rarely covers ongoing chronic care needs.