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