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Long Term Care Insurance
from: TRLMedicare, HMOs and Medigap insurance do not pay for
nursing home care for long-term stays or for assisted living. Insurance can be purchased to help pay for these costs. Without long-term care insurance, a one-year stay in a nursing home, estimated at $25,000-$42,000 per year, can wipe out a family's nest egg and leave the spouse without financial resources for living expenses.
*When shopping for long term care insurance compare:
*What are the premium costs?
*How long has the company been writing this insurance?
*What is the company's history on payouts?
*Is there is a company history of premium increases?
*Is a "partnership" policy available?
*Is the policy tax qualified?
*What will the insurance policy cover?
*Nursing home?
*Home care?
*Care-giver training for home care?
*How many years will it pay for?
*How does the policy treat pre-existing conditions?
*How much will it pay per day?
*Is it indexed for inflation?
*How is the indexing calculated?
*Under what conditions are premiums waived?
*What medical benefits are covered, besides basic nursing home costs?
*How many days must you wait before coverage starts: 1, 30 or 90 days: referred to as the "deductible"?
*How does this long-term care insurance fit with your managed care coverage or Medigap insurance coverage?
*What is the daily benefit maximum?
*For how many years, months, does coverage last, or is there a maximum pool of money?
*What optional benefits are available?
*What do the optional benefits cost?
*What is the daily rate for nursing homes in your area now?
Tax Qualified Long Term Care Insurance vs. Non-Tax-Qualified Policies
Understanding the differences between tax-qualified and non-tax-qualified long-term care insurance plans is important when considering the purchase of long-term care insurance. As the names imply, tax-qualified plans provide the purchaser with certain tax advantages, including the assurance that benefits paid reimbursing them for qualified long-term care service costs will be excluded from their taxable income, while non-tax-qualified plans do not provide the same assurance.
Another advantage is that premiums paid for tax-qualified long-term care insurance plans can be deducted as medical expenses by taxpayers who itemize (subject to Internal Revenue Code limits). Proposed federal legislation for an above-the-line tax deduction for long-term care insurance premiums would only apply to tax-qualified long term care insurance plans.
There are other differences that consumers may wish to consider.
*Tax-qualified long term care plans are designed to cover disabilities that are expected to last for a prolonged period of time, and the IRS has set specific eligibility standards for qualified benefits to be payable. The policyholder must either need substantial assistance with two of at least five activities of daily living (ADLs) for a period expected to last at least 90 days or suffer from severe cognitive impairment.
*That need must be certified by a licensed health care practitioner. Long-term care services must be in accordance with a Plan of Care prescribed by a licensed health care practitioner, and benefits can only be paid for qualified long-term care services.
*Under non-tax-qualified policies, the insurance company may offer different benefit eligibility triggers, including allowing eligibility for benefits upon a finding of medical necessity. These less stringent triggers may provide access to benefits quicker than under tax-qualified plans.
*Premiums are generally higher than for tax-qualified policies with equivalent benefit levels, benefits may be taxable as income, and premiums may not be deductible medical expenses.
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