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Long-Term Care Insurance is not Just for Seniors

When long-term care insurance first came on the scene, it was generally directed towards people of retirement age who could be facing imminent nursing home expenses.

Today, the aging baby-boomer generation is the largest market segment. Since they're holding a great deal of wealth, all sorts of products are now directed towards them. Long-term care insurance is clearly one of them, because a long-term care crisis is a family issue and one that impacts people of all ages.

Recent studies indicate that nearly nine out of 10 people believe that providing long-term care is a big problem. Six out of 10 have experienced long-term care firsthand, more than 53 percent have served as caregivers while one-fourth provide financial support for a family member or friend According to a survey by the American Association of Retired Persons (AARP), more than half of the respondents expect that someone in their own families will require long-term care within the next five years.

Gaps in the insurance system have helped to create a need for long-term care coverage. Medicare and Medigap policies, for the most part, may cover just a small and limited portion of the cost of skilled care in a nursing home. That's why it makes sense for some people to seek other sources of financing. One option is to purchase long-term care insurance that covers the cost of nursing home or other long-term care.

A typical stay m a nursing home can cost from $25,000 to $80,000 per year, depending on location and the necessary level of care. The cost can be devastating to the financial security of many families - but a small and growing number of them are self-insuring against at least part of the cast of long-term care.

Under new legislation passed in August (HR3103, Health Insurance Portability and Accountability Act of 1996, effective for taxable years beginning after Dec. 31, 1996), longterm care benefits received are viewed as medical expenses and are not taxable income. All premiums will be treated as a medical expense for the purpose of itemizing medical deductions, to the extent that they exceed 7-5 percent of adjusted gross income. The limitation on premiums paid for a taxable year will range from $200 to $2,500, depending on the age of the individual.

What are the advantages of long-term care insurance? First of all, it allows you to maintain your personal independence and protects your freedom of choice. Should you need assistance, you can decide whether it's at home or in a recognized facility. In addition, long-term care insurance allows you to preserve your retirement income and your assets.

What are your chances of needing longterm care? An estimated 45 percent of persons over the age of 85 will spend some time in a nursing home, according to the journal of Taxation of Estates and Trusts. Other studies indicate, surprisingly, that more than one-third of those who need help with daily activities are between the ages of 18 and 65. For every person who requires long-term care in a nursing home, there are five others who need long-term care in their own homes.

People who are considering long-term care insurance should ask many questions before they make any decisions:

  1. Does the policy cover care in any licensed care facility?
  2. What are the policy's benefit periods or dollar limits?
  3. How does the policy treat pre-existing conditions?
  4. Does the policy cover Alzheimer's Disease or other psychiatric or mental conditions? Is a clinical diagnosis required?
  5. Is the policy renewable?
  6. What is the annual premium? Haw does it compare with other long-term care polices?
  7. Are premiums waived while you are confined to a long-term care facility or receiving community-based services?
  8. Should you have coverage for home health care as well?
  9. What is the waiting period before you can collect benefits?

Benefits, conditions and other factors vary in regard to dollar coverage, deductibles and time periods, payment/collection timetables, services covered and Medicaid asset protection. Note that New York and Connecticut are among just five states (the others are California, Illinois and Indiana) that allow you to protect some or all of your assets and still go on Medicaid if you have purchased a pre-approved long-term care insurance policy (from one of these states) that meets specific, standards.

Before making an arrangement, be sure to check the latest state and federal laws and limitations. Know the facts, personal, financial and legal status.

Most important before signing anything: consult with attorneys (preferably one who specializes in eldercare issues), accountants and other professionals who specialize in geriatric issues, problems and solutions.

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