Long Term Care Insurance

This past Sunday most families were celebrating Father’s Day. Most would agree that family is one of the most important parts of life. It's important to protect yourself and your loved ones. How do you ensure that you and your spouse or your parents are protected in their twilight years?

One way to protect them is through long term care insurance. In this article we will discuss what long-term care insurance is, why it's important, and how it works. We will also discuss its potential cost and the tax advantages that come along with purchasing it.

What is Long Term Care Insurance?

Long-term care refers to a host of services that aren’t covered by regular health insurance. This includes assistance with routine daily activities such as; bathing, dressing, getting in and out of bed.

A long-term care policy helps to cover the costs that arise from chronic medical conditions, disabilities, or disorders such as Alzheimer’s. Most policies will reimburse you for care given in your home, a nursing home, an assisted living facility, or an adult day care center.

Although long-term care insurance may not be needed until the end stages of life, this is the wrong time to be shopping for this type of coverage. Chances are if you wait to buy long-term coverage until you are actually in need of it you won’t qualify. Most people who do purchase long-term coverage purchase it in their mid-50s and 60s. Here are something to consider about purchasing long-term care insurance.

Why buy long-term care insurance?

Living in the twenty-first century has afforded us massive jumps in information and technology, some of which has improved medical care and extended the lives of human beings. Most would agree this is a wonderful thing. However, it does present some issues. About half of 65 year olds today will eventually develop a disability that requires the assistance of some long-term care service. Most will need services for less than two years, but about 14% will require care for more than five years.

Most people purchase long-term care insurance in order to protect their savings and make long-term care affordable. Long-term care is not covered by health insurance. Medicare only covers short stays at a nursing home or limited home health care. Those with low incomes are able to get some financial help through Medicaid.

People buy long-term care insurance for two reasons:

  1. To protect savings: Long-term care costs can drain savings at an alarming rate. The average cost for care in a semi-private nursing home room was $89,297 a year in 2018.

  1. To provide more choices for care: Those without long-term care coverage are often limited in their care choices to what they can afford. Those with low incomes are limited to what Medicaid will cover or where it is accepted. Medicaid does not pay for assisted living in many states.

How Long-Term Care Insurance Works

To purchase a long-term care policy, first you must fill out an application and answer health questions. The insurer may ask to see medical records and interview you.

Next you choose the amount of coverage you want. Policies are usually measured by the max amount paid out everyday and max amount paid out over your lifetime. Once you’re approved for coverage and the policy is issued, you begin paying premiums.

Under most long-term care policies, you become eligible for benefits when you cannot perform at least two of six “activities of daily living” without assistance or suffer from dementia or other cognitive impairment. The activities of day living are: bathing, dressing, eating, toileting, transferring (getting out of bed or a chair), or incontinence.

When you need care and want to make a claim, the insurance company will review medical documents from your doctor and may send a nurse for an evaluation. Before approving a claim, the insurer must approve a personal “plan of care”.

How much does Long-Term Care Insurance Cost?

Rate of payment for long-term care insurance are based on these categories:

  1. Age and health: those who purchase long-term care insurance at a more advanced age or those who have health problems will often pay more than younger, healthier persons.

  2. Gender: women generally live longer than men and will often pay more for long-term care insurance.

  3. Marital Status: premiums are lower for married people.

  4. Insurance Company: prices for the same coverage vary between different

  5. insurance companies.

  6. Amount of Coverage: generally more comprehensive coverage will cost more. Some other benefits that add cost are cost of living adjustments, shorter elimination periods, and fewer restrictions on the types of care covered.

Tax Advantages of buying Long-Term Care Coverage

Long-term care coverage can come along with some tax advantages if deductions are itemized. Tax dedication also increases as you age. Federal and some state tax codes allow part or all of long-term care insurance premiums to count as medical expenses, which are tax deductible if they meet a certain threshold. The limits for the amount of premium you can deduct increase with age.

We hope this article is informative and gives you some pertinent information on Long-term care insurance and why it’s important. At Southern Insurance we understand the value of protection when it comes to your loved one and yourself. If you have any questions concerning long-term care coverage or any insurance coverage people reach out to us. You can message us directly on our website or give us a call at (423) 296-0626.

Thanks for reading!

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