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Unlike many traditional health insurance plans that pay for services based on a percentage of the total charge, many long term care insurance plans pay a flat daily benefit. The daily benefit is the amount of money the insurance company has agreed to pay per day for you to receive long term care services. Insurance companies usually offer a range of daily benefit amounts for you to choose from starting around $50 and going as high as $250. Your premiums will be lower or higher according to the daily benefit you select. Not all companies offer this choice. Some companies only offer policies that pay your actual costs. A good way to decide which daily benefit to select is to find out what the current cost of care is in your area and choose your daily benefit accordingly. You can do this by calling nursing homes and independent living facilities in your area. If you would prefer not to do this, consider this: According to the Health Insurance Association of America, annual nursing home costs is greater than $40,000. This would average out to $112 minimum per day.
If you have ever signed up for health care insurance, you know that most policies have what is called a "waiting period." The waiting period is usually a month to three months during which you are not eligible to receive benefits even though you are enrolled in the plan. Long-term care insurance plans have something similar known as the elimination period. The elimination period is the period of time which is usually anywhere from 20 to 100 days, and during which you are not eligible to receive daily benefit payments. Some insurance plan providers specify the duration of the elimination period from the beginning. Other plans will let you choose the duration yourself. In those instances, longer durations usually bear lower premiums, and shorter durations bear higher premiums. Some insurers offer a day-one benefit option that allows you to avoid the elimination period altogether. When you compare long term health insurance plans, make sure you ask each company whether the elimination period is once in a lifetime or whether it can repeat.
Inflation protection is usually an add-on, offered by long term care insurance policy providers that is tied to the initial daily benefit you choose. If you buy a long term care policy when you are 55 years old, it is very likely that the cost for long term care will escalate before you tap your benefits, and you run the risk that your fixed daily benefit will not cover your actual costs.
Inflation protection automatically increases your daily benefit on an annual basis to keep pace with inflation. While inflation protection is not required, it is recommended if you are buying your policy while you are still relatively young.
The younger you are when you purchase your long-term care insurance policy, the lower your premiums will be. This is because the insurer stands to collect premiums over a longer period of time. But you would not want to purchase it too early to avoid overpaying. According to most financial planners, the best time to buy long term care insurance, sometimes called long term health care insurance, is in your late 50s or early 60s. In their late 50s and early 60s, the health of most individuals is stable, and the premiums for policies purchased at this stage of life are generally reasonable. Regardless of when financial planners think is the best time to purchase a long term care policy, one thing is certain: You must purchase your policy before you need long term care. Eligibility is based on your current health status, so if you are already ill and requiring constant care, you probably will not qualify for coverage.
Rather than enter a nursing home, many people are choosing to receive services in their own homes. While a traditional health care insurance may cover a portion of these expenses for the short-term, long-term delivery of these services in the home setting are an excluded item under your some plans. However, some long term health care insurance policies do include coverage for home health care services. Usually this is an add-on to the core policy, available if you agree to pay a higher premium. You will need to further the specifics of long term care insurance for more information. A home health care add-on often covers services received in the home as well as those received in places such as adult day care centers and assisted living facilities. When you compare long term health insurance plans, do not assume home health care is included. Ask specifically about what home health care benefits are provided under the plan.
The benefit period is the length of time your long term care insurance policy will continue to pay out daily benefits once you become eligible to receive benefits under your plan. Insurance companies usually offer a range of anywhere from two to five years from which you can choose. Some plans even offer lifetime benefit periods. The longer the benefit period you elect, the higher your premiums will be. When trying to decide, keep in mind that according to the Health Insurance Association of America, 40% of the elderly receive paid home health care services and about 50% of all elderly will spend an average of two-and-a-half to three years in a nursing home.
Each long term care insurance plan provider would have a different definition of what constitutes long term care, but generally speaking it is used to describe any chronic or disabling condition that requires skilled nursing care or constant supervision. This is usually the qualification considered for receiving long term care benefits.
Typical triggers to qualify for long-term care benefits include an individual being unable to eat, walk, get from bed to a chair, dress, bath, or use a toilet without assistance.
Congress created The Standard Deduction allowing individuals who itemize deductions on their tax returns to deduct premiums paid for long term care insurance policies. The amount you can deduct is subject to 7.5% of the gross income limitation, but if you are self-employed the premiums are deductible as an adjustment to gross income.
Therefore, your maximum deduction is based on your age and range from approximately $300 up to more than $3,000.
Long-term care insurance policies are quite varied. Before you can make an intelligent decision about which plan to buy, you should gather some basic information. While some of your questions may be considered basic, ask the plan representative what type of care is covered. Getting long-term care insurance information is important.
Long-term care insurance, also known as LTC, is insurance that will pay all or part of the cost to receive services in a nursing home or assisted living facility. In some cases, long-term care will also cover costs associated with in-home care. As the average life expectancy has increased thanks to advances in medical care, there has been a corresponding increase in the need for individuals to receive care in nursing homes and assisted living facilities. Many traditional health insurance plans, do not cover these costs. Today, the costs for nursing home or assisted living services can run as high as $1000 a day or more. Rather than pay those costs out-of-pocket, many people purchase long term health care insurance separate and apart from their regular health insurance policy.
|Jennifer Mathes, Ph.D.|