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What's the Story on Long-term Care Insurance?


Typical employer-based health coverage doesn't pay for daily care services, and Medicare will only cover a short stay in a nursing home or a limited amount of at-home care. And so, long-term care insurance was born.

Policies offer many different coverage options to help you pay for the care you need, whether living at home, in an assisted-living facility or in a nursing home. Long-term insurance may pay expenses for adult day care, as well as help pay costs associated with modifying your home so that you can keep living in it safely.

Factors that affect coverage:

  • Age and health — Will you be able to pay the policy's premiums now and in the future? They can be expensive, but note that policies cost less if purchased when you're younger and in good health.
  • Premiums increase over time — Your income may decrease at the same time. If you are unable to afford the premiums in the future, you may lose all the money you've already invested in a policy.
  • Your income — If you have difficulty paying bills or are concerned about paying them in the years ahead when you have fewer assets, spending thousands of dollars a year for a long-term care policy may not make sense. If your income is low and you have few assets when you need care, you may qualify for Medicaid. However, Medicaid generally will not give you the same level of coverage as an LTC plan.
  • Your support system — You may have family who can provide some long-term care. Would you want their help? How much can you reasonably expect from them?
  • Your taxes — This can get complicated. In many cases, there are tax deductions for both premiums paid and benefits received, but there are a lot of details you need to discuss with a financial professional.

What long-term care policies are out there?

  • Individual plans — Sold through an insurance agent or broker. Make sure the person you buy it from has additional training in long-term care insurance.
  • Employer-sponsored plans — some employers offer group long-term policies or make individual policies available at a discount. The policy may be portable after you leave.
  • Plans offered by organizations — A professional or service organization that you belong to may offer group-rate long-term care insurance policies to its members. Study your options if you were to leave the organization or if coverage were terminated.
  • State partnership programs — If your long-term care policy qualifies for a state partnership program, you can keep a specified amount of assets and still qualify for Medicaid.

Be on the lookout for coverage exclusions — most states have outlawed companies from requiring that you be in a hospital or nursing home for a specific number of days before you can qualify for benefits. Some states, however, do permit this exclusion, so check your plan for this and other "fine print" issues.

This is just a basic introduction to a complicated topic. As always, feel free to contact our office for help in determining if long-term care insurance is right for you, and if so, what options are best.



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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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