Long-Term Care Insurance and Where to Get It
Long-term care insurance helps pay for a variety of services that assist people with health or personal issues that might result from a chronic disease, serious accident, sudden illness, or cognitive impairment such as Alzheimer's disease. Long-term care services are different from traditional medical care in that their focus is not necessarily to improve the medical condition of the individual but to maintain the individual's quality of life. Contrary to popular belief, long-term care is not an issue just for the elderly.
Today, the cost of nursing home care in the US varies from $50,000 to over $100,000 per year. Home health care can be just as expensive as care in a nursing facility, depending on the frequency and type of home health care services required.
Health Insurance Plans and Long-Term Care
Traditional health and disability insurance plans do not typically cover long-term care. Medicare and Medicare supplement insurance (Medigap) do not typically cover long-term care either. Many Americans are unable to afford long-term care through their income and personal savings. For most people the only options for financing long-term care are LTC insurance or Medicaid (after spending down personal assets).
Smart Financial Protection
Quality LTC insurance provides a means of protecting your financial independence against the event of costly long-term care in the future. The Commonwealth of Virginia and the federal government consider LTC insurance a viable financing option and, therefore offer long-term care insurance to their active and retired employees and their family members. Many financial experts today recommend LTC insurance as a key element for most personal financial and retirement plans.
Do You Really Need Insurance?
When you need long-term care, it is too late to start thinking about LTC insurance. It is important to plan now so that you don't become a liability to your family.
The thought of being a financial burden to our family is reason enough to plan for long-term care. After all, we don't like to think of ourselves as frail and dependent in the future, but denial can be detrimental to our and our families' best interest.
A very real need
The possibility of needing long-term care at some point in life is a reality. Most Americans will need long-term care at some point in our lifetimes, and the cost of long-term care is very expensive. Most Americans cannot afford to pay for the long-term care services that they need in their lifetime.
LTC insurance pays for part or all of the long-term care services you need. There are several reasons why you need to consider purchasing LTC insurance:
- The cost of long-term care is very high. A Partnership Policy protects a portion of your assets in the event you need long-term care in the future. It works in the same way you protect yourself with auto and homeowners insurance.
- Medicare and other health insurance do not pay for the majority of long-term care.
- While Medicaid (the federal and state health insurance program for the poor) will pay for nursing facility care and some home care, you must be poor in order to qualify for assistance. For example, a single person can have no more than $2,000 in assets to qualify for Virginia's Medicaid program.
- The risk of needing long-term care is high. According to a national study conducted in 2005, 69% of persons who reach the age of 65 will need some long-term care.
Taxes and LTC Insurance
The Internal Revenue Code allows favorable tax treatment of long-term care policies that qualify under the law. Generally, benefits you receive from tax-qualified policies will not be considered as taxable income under either federal or state law. The premiums charged for tax-qualified policies are treated as medical expenses under your federal return for purposes of itemized deductions up to certain dollar limits that are indexed annually.
You should consult with an attorney, accountant, or tax advisor regarding the tax implications of purchasing a tax-qualified policy.
The Specifics of LTC Insurance
LTC insurance policies vary in the amount and scope of services they cover and the setting in which services are delivered. Contact your insurance agent, broker, financial planner, or insurance company for specifics. Read about the types of long-term care services.
Purchasing LTC insurance
Long-term care insurance is available from any licensed insurance company that sells LTC insurance. To purchase it, contact a licensed insurance agent or an insurance company. Please note, the Commonwealth of Virginia and the Department Of Medical Assistance Services do not sell LTC insurance.
Virginia LTC Partnership Policy
Virginia Partnership Policies for LTC insurance are only sold by certain insurance companies. These companies are listed on the Virginia Bureau of Insurance website.⇒
Partnership policies are only sold through licensed insurance agents who have completed special training required by the Commonwealth. A Partnership Policy, with its unique Dollar-For-Dollar Asset Protection feature assures that you will not be forced to spend your life's savings on long-term care.
What about the cost?
For LTC insurance, your age at the time of purchase is an important factor. The younger you are when you purchase LTC insurance, the lower the premium. The premium also depends on the benefits and features you choose.
Each insurance company sets its own rates. Talk with an insurance agent or the insurance company to get specific rates. Shop around. Premiums can vary greatly across companies and within companies depending on what features are included in your policy.
Cost Factors
Factors that influence the cost and quality of LTC insurance policies:
- Age
- This is the single most important factor -- the older you are, the more expensive your premium will be. Should you buy LTC insurance now or wait? Don't wait until it's too late. The timing may be important; consult with your family, financial and legal advisors, and an insurance agent.
- Elimination Period (deductible period)
- Just like car insurance, LTC insurance has a deductible, which is referred to as the elimination period (or waiting period). This is the number of days you are responsible for your long-term care costs before qualifying for payments from the LTC insurance policy. The shorter the elimination period, the more expensive your premium will be.
- Daily Benefits
- The higher the daily benefit, the less you may need to pay out-of-pocket for care, but your premium will be higher.
- Lifetime Benefits
- This is the total amount the policy will pay out for long-term care services.
- Covered Services
- Some policies provide a comprehensive pool of dollars that can be used to pay for care received in the home, in the community, or in a nursing facility. Others only pay for care received in a nursing facility or assisted living facility. The more comprehensive the policy, the more choices you will have, and the more expensive the premium will be.
- Health Factors
- Some companies charge lower premiums for applicants in very good health and higher premiums for applicants with particular health conditions or health histories.
- Inflation Protection
- This increases the benefit levels to account for anticipated increases in the cost of services over time. It is important to know that long-term care costs have been increasing about 5% per year. Inflation protection can dramatically reduce your out-of-pocket expenses for long-term care services. All Partnership Policies purchased by individual under age 76 must include inflation protection.
Medical Underwriting
To purchase LTC insurance, you must pass the medical underwriting requirements of the insurer—this applies to Partnership Policies and non-Partnership policies. In the event of rejection, you may apply for coverage from another insurance company since underwriting standards vary by company. Insurance companies are not required to sell you a policy if you do not meet their underwriting standards. The best way to avoid medical underwriting problems is to purchase LTC insurance when your overall health is good.
Paying the Premiums
Purchasing LTC insurance is a major financial decision. Keep in mind that the insurance coverage will only protect you if you keep the policy in force, by paying premiums. Thus, it is essential to plan to ensure your ability to maintain your long-term care policy whether through your own resources or with some partial contribution to premiums from those likely to benefit someday from your protected assets.
Who can purchase a Partnership Policy?
Any Virginia resident can apply for a Partnership Policy. The ideal applicant is generally healthy, meets the issue age limits established by the insurance company, and is able to afford the cost of the insurance.
Tips on the VA LTC Partnership
- Be a smart consumer.
- Don't wait until it's too late to purchase long-term care coverage.
- Shop around and compare policies and prices based on your needs, where you live, and what you can afford to purchase.
- Confirm that the policy you purchased is, in fact, a Partnership Policy. A Partnership Disclosure Notice will be included with your policy if it is a Virginia Long-Term Care Partnership Policy.