5 Helpful Tips About Long-Term Care Insurance

It’s no secret that healthcare services can cost what might be described as “too much money.” When a patient suffers from a disability, injury, or illness that requires long-term care, those costs can compound quickly.

Enter long-term care insurance. Policies are available for purchase as either a standalone policy or as a rider on a life insurance policy. Whichever option you choose, the insurance helps cover some of the costs associated with long-term care.

When you shop for long-term care insurance, you have a lot of options to choose from. As with most insurance policies, they often come with restrictions, regulations, and varying factors that can affect the cost of premiums. Understanding these nuances can help you find a policy that meets your needs and budget.

Today, we’re offering five helpful long-term care insurance facts and tips so you can better understand what to look for when shopping for a policy that suits your needs.

1. Coverage

Long-term care insurance covers various services associated with extended care needs that are not typically covered by regular health insurance or Medicare. This includes:

• Help with activities of daily living, like bathing and dressing
• Skilled nursing care (at home)
• Physical and occupational therapy
• Hospice care
• Home modifications, like grab bars and wheelchair ramps

This insurance may also cover the cost of care in different settings, such as in-home care, adult day care, nursing homes, and assisted living facilities.

2. Elimination period (EP)

The elimination period of long-term care insurance refers to the period between triggering an insurance payout and receiving the benefits. During this time, the policyholder must pay out-of-pocket for any care they receive. This waiting period is similar to a deductible in other types of insurance, except that it is measured in time rather than in dollars.

The length can vary depending on the policy and the insurer and can last as long as a year. With a typical policy, you’ll receive between a 30 day EP and a 90-day elimination period.

Choosing a more extended elimination period can help lower the cost of premiums. Still, it also means that the policyholder will have to cover more of their care expenses before the insurance benefits kick in.

It’s important to consider the length of the elimination period when selecting a long-term care insurance policy to ensure it fits your financial situation and care needs.

Elimination periods usually count time in one of four ways:

• Calendar days: the number of benefit eligibility days following the insurance provider approving the claim
• Service days: The number of days a patient receives (and pays for) qualified care services
• Service days with credit: Similar to service days, with one change: patients who pay for one day of service in a week can receive a whole week’s (7 days) credit toward their elimination period
• Waiver of EP for Home Care: If receiving care at home, the patient might qualify for an elimination period of zero days. With this, the patient can immediately receive benefits for care received at home.

3. Tax benefits

Here, there’s good news and better news.

The good news: the benefit payments you receive are not considered income. Because of this, they’re non-taxable and don’t increase your tax burden.

The better news: Like long-term care expenses, your insurance premiums might be tax-deductible! However, there are two catches:

1. To earn the deduction, you must itemize your taxes.
2. Your premiums must exceed 7.5% of your Adjusted Gross Income.

Additionally, a qualified family member who pays for the premiums can deduct the payments from their taxes. To qualify, they usually need to be a close family member and be the only person claiming the deduction on that policy. Again, the premiums must exceed 7.5% of their AGI.

4. Disqualifications

Several factors may disqualify a person from obtaining long-term care insurance. Some of these factors include:

• Age: Some insurers may have an age limit for coverage eligibility. Usually, patients considered elderly (age 85 and older) can no longer apply for insurance.
• Pre-existing medical conditions
• History of drug or alcohol abuse
• A criminal record
• History of mental illness

It’s important to note that each insurance company has its own underwriting guidelines, so an individual may be denied coverage by one insurer but be eligible for coverage with another.

5. Costs

One of the first things to consider when shopping for long-term care insurance is the cost of premiums. Premiums vary widely depending on various factors, making them hard to predict. The primary factors that can affect the costs of your long-term care insurance premiums include:

• Age
• Health
• Amount and duration of coverage
• Marital status
• Gender
• The insurer’s policies

The American Association for Long-Term Care Insurance (AALTCI) releases extensive cost studies every year.

Because age is a factor, it can help determine the best time to purchase an insurance policy. It’s generally recommended that individuals purchase a policy by age 65, as premiums tend to increase as they get older. This is partially because we’re more likely to suffer from increased health problems as we age.

Waiting too long to purchase coverage can also increase the risk of being denied coverage due to pre-existing conditions or other factors. However, it’s important to note that everyone’s situation is different, and it’s never too early or too late to start planning for your future care needs.

Consider consulting a financial advisor to help guide you through the process.