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Long-Term Care Insurance: Right for You?

 

Someday, you may need assistance with such routine daily activities as bathing, dressing or getting in and out of bed. An LTC insurance policy is there to help with the costs of such care should you have a chronic medical condition, a disability or a disorder like Alzheimer's disease.

Nearly 70% of 65-year-olds will need long-term care or support, according to 2020 data from the Administration for Community Living, part of the U.S. Department of Health and Human Services. Women typically need care for an average of 3.7 years, while men require it for 2.2 years.

Most policies will reimburse you for care given in:

  • Your home.
  • A nursing home.
  • An assisted living facility.
  • An adult day care center.

These costs can deplete savings quickly: The median annual cost of a semiprivate nursing home room is $93,072, according to Genworth's 2020 Cost of Care Survey. Regular health insurance doesn't cover long-term care — Medicare covers short nursing home stays or limited amounts of home health care for rehab, generally. It doesn't pay for custodial care that includes supervision and help with day-to-day tasks.

Take advantage of tax breaks

LTC insurance can not only help you with expenses but reduce your taxes as well. If you itemize deductions, federal and some state tax codes let you count part or all your premiums as medical expenses, which are tax deductible — but they have to meet a certain threshold. The deduction limits increase with your age. Only premiums for tax-qualified LTC insurance policies are counted as medical expenses and must meet certain federal standards and be labeled as tax-qualified.

The financial nuts and bolts

LTC insurance involves paperwork. This starts when you decide to buy a policy. You 'will have to answer health questions and may be asked for your medical records. You'll likely be interviewed by phone or in person. The costs depend on your age and health — the older you are and the more health problems you have, the more you'll pay to buy a policy. Women tend to pay more than men because they live longer and have a greater probability of making claims. Premiums are lower for married people than for singles.

The paperwork continues when you make a claim. How do you know when you're eligible for a payout? Basically, it's when you can't do at least two activities for daily living like bathing or getting in and out of bed. To approve a claim, the company reviews medical documents, sends a nurse to do an evaluation and then must approve of your plan of care. You'll have to pay for long-term services for a certain amount of time — like 30, 60 or 90 days — before the insurer starts reimbursing you for care.

Note that some companies offer a shared care option for couples when both spouses buy policies, letting you share the total amount of coverage. You can draw from your spouse's pool of benefits if you reach the limit on your policy.

Is LTC insurance right you? You have to weigh future expenses against premium costs to see what kind of policy, if any, is right for you. This is just a summary of a complex product. Work closely with trusted financial professionals.

 

 
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Davis & Graves CPA, LLP
Davis & Graves CPA, LLP
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