Unfortunately, the high cost of long-term care services can easily deplete a person’s retirement savings. That’s why industry experts recommend long-term care insurance for those who can afford it. In addition to helping older people protect their pension fund, this type of coverage gives them the best possible care.
If you are an insurance broker and people are asking questions about long-term care insurance, this is a great article to share with them.
The answer to this question may vary from state to state and country to country, but in the US, the policyholder must obtain certification from a reputable health care provider that they can no longer do at least two of the following without direct assistance. They are also called “gain triggers”. Most countries have them in one form or another:
- Bathing: Possibility to get in and out of the bathroom to wash.
- Abstinence: ability to control urination and defecation.
- Dressing: This is the ability to put on or take off one’s own clothes.
- take foodA: It’s the ability to feed yourself.
- toilet: This is the ability to get in and out of the toilet.
- Broadcast: is the ability to get up and out of bed or chair.
Insurers may also be eligible for care benefits if they suffer from a debilitating condition, including Alzheimer’s, dementia, and schizophrenia.
In addition, most policies require beneficiaries to pay out-of-pocket care for a specified period of time, also referred to as the “liquidation period”. This usually lasts 30-90 days, after which the insurance company starts reimbursement. LTCI plans pay up to the daily care limit until the lifetime maximum is reached.
Some insurers offer couples the opportunity to share care, allowing them to share the total amount of insurance coverage and receive benefits from each other as soon as one of the spouses reaches the limit of their policy.
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Like other types of insurance policies, long-term care insurance premiums depend on a number of factors. This includes:
- Age: Younger policyholders can expect lower rates, although they will have to pay for their plans longer.
- Health status: Postponing insurance purchases until health problems arise can result in higher premiums or, worse, denial of coverage.
- FloorA: Women often pay more than their male counterparts as they tend to have a longer life expectancy, which makes them more likely to make claims.
- Family statusA: Married couples generally receive lower insurance premiums than single people. They also have the opportunity to acquire shared benefits.
- Coverage level: Higher daily and lifetime limits, as well as the use of additional features, including inflation protection and shorter exclusion periods, may increase insurance costs.
- InsurerA: Rates vary by insurance company.
The Long Care Insurance Association of America (AALTCI) recently released its 2022 Price Index, which details how much insurers of different ages, genders and marital status can expect to pay in annual premiums. Here is a summary of the cost of a $165,000 covered policy. According to the industry body, the rates below are for “Select” insurance policies, which are more expensive than “preferred” insurance plans.
Since such policies provide health-related coverage, long-term care insurance policies can easily be confused with other forms of health insurance plans. However, there is a huge difference in terms of coverage.
- Standard medical insurance: This covers medical expenses, including visits to doctors and hospitals, emergency surgeries and medications. It does not cover long-term care services.
- Critical Illness Insurance: This covers the cost of treatment and recovery from serious illnesses. Most policies pay a lump sum that the insured can use to replace lost wages or pay medical and non-medical expenses, including mortgages and groceries.
- Disability Insurance: This pays out a portion of income if the policyholder is unable to work due to injury or illness.
- Life insurance: This type of plan works by providing a tax-free lump sum payment to the insured’s family after the insured’s death.
- Medicare: Available to seniors and people with disabilities, Medicare offers limited benefits for nursing home stays after hospitalization, often only providing coverage if the illness is acute or temporary. It does not cover long-term detention or chronic illness.
- Medicaid: This public health program provides financial support for long-term illnesses, but with strict eligibility criteria. Specific income limits are set by state—for example, $18,745 for states with expanded Medicaid—and beneficiaries may be required to liquidate their assets or spend some of their out-of-pocket Medicaid spending program benefits to qualify.
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The Internal Revenue Service (IRS) allows qualified taxpayers to deduct a portion of their long-term care insurance premiums on their tax returns as “unreimbursed medical expenses” based on their age. But they must itemize these deductions, which must also not exceed the Adjusted Gross Income (AGI) threshold.
The table below shows the 2022 deduction limits set by the legislature.
It is also important to note that LTCI plans are tax deductible, meaning policyholders are not taxed on any benefits they receive.
Many policies from different companies will be available in your country, but here are some general points to consider when choosing a policy:
- Benefit amount: This includes an assessment of the type of care the person expects to receive and the daily cost of it. It is important to note that long-term care costs can vary significantly depending on where a person lives and the quality of care. Care in a private nursing facility, for example, costs more than home care.
- Due date: Some insurers allow customers to choose how long they want to pay for a policy, usually from two years to a lifetime. One of the main determining factors here is the medical history. If a person has a family history of a debilitating illness that will require years of care, it may be preferable to opt for a longer benefit period.
- Age: Most industry experts recommend taking out a policy between the ages of 50 and 60. Buying an LTCI policy at a younger age can help reduce premiums.
- Waiting or liquidation period: Insurers typically set waiting periods of 30, 60, or 90 days before benefits kick in. This entails that insurers must pay out-of-pocket medical expenses for a certain period. It should be noted that the longer the liquidation period, the lower the premiums.
- Inflation protection: Medical expenses have risen over the past few years due to inflation. Nursing home rates, for example, have risen by an average of 5% a year. Insurance companies often offer inflation protection to passengers, resulting in an annual increase in daily allowance.
- Tax implicationsA: Most insurance companies offer tax-free policies with tax-free benefits and deductible premiums. The deductions, however, vary depending on the age of the taxpayer.
- Reputation of the insurer: With many providers exiting the market in recent years, it is important for customers to exercise due diligence and choose an insurer that is financially stable and committed to offering the best possible care to policyholders.
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The best long-term care insurance providers will vary greatly depending on the country you are in. Go to our Best Insurance page and click on your country at the top to find the insurance brokers that will work for you. All of them are verified by colleagues in the course of a survey conducted by our employees.
And you? Do you think long-term care insurance should be considered? Share your thoughts in the comments section below.