The Basics of Long-Term Care Insurance
Thinking about the need and the costs of long-term care is enough to make anyone uncomfortable. But while it’s a difficult subject to talk about, it’s also a topic that often generates lots of questions and misunderstanding.
Consider this: The average cost of nursing home care in the United States now exceeds $70,000 per year, with wide ranging variations from state to state.*
For the most part, those who need long-term care are left to foot the bill on their own. Neither Medicare, nor Medicare supplemental coverage (“Medigap”), nor standard health insurance policies cover long-term care unless you are impoverished. That’s why long-term care insurance is so important. Since premium costs are based on your age and health at the time of purchase, the younger and healthier you are when you purchase a policy, the lower the premium you’re apt to pay during the life of the plan.
As you evaluate long-term care insurance, keep the following variables in mind:
Coverage Parameters. Policies will differ in the types of services they support. Be sure to choose a policy that best meets your particular needs.
Benefits Payout. how much does the policy pay per day for care in a particular setting? how does the policy pay out? (e.g., a fixed daily amount, as reimbursement for the cost of care up to a daily maximum?) Does the policy have a miximum lifetime limit?
Eligibility. Does the policy use certain “triggers” to determine benefits eligibility, such as the formal diagnosis of an illness or disability? What is the maximum issue age for the policy?
Women May Need More. Longer life spans for women may signal the need for additional coverage.
Finally, keep in mind that most long-term care policies sold today are federally tax qualified, which means premiums paid and out-of-pocket expenses are deductible. Also, long-term care benefits received are not taxed as income up to certaim limits.
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