Long-term care (LTC) insurance is coverage that provides nursing-home care, home-health care, personal or adult day care for individuals age 65 or older or with a chronic or disabling condition that needs constant supervision. LTC insurance offers more flexibility and options than many public assistance programs.
Understanding Long-Term Care (LTC) Insurance
Long-term care is usually very expensive, which is why most people need insurance. For example, on average, nursing facilities providing skilled care charge $150 to $300 per day—more than $80,000 per year or more. Custodial home care at three visits per week can cost more than $9,000 each year.
Most LTC insurance policies will cover only a specific dollar amount for each day you spend in a nursing facility or for each home-care visit. Thus, when considering an LTC insurance policy, read the policies carefully and compare the benefits to determine which policy will best meet your own needs.
Full home care coverage is an option for LTC insurance and will pay for home care from the first day it is needed. It will cover expenses for a visiting or live-in caregiver, companion, housekeeper, therapist or private-duty nurse up to seven days a week, 24 hours per day, up to the policy benefit maximum.
Many experts suggest shopping for LTC insurance between the ages of 45 and 55, as part of an overall retirement plan to protect assets from the high costs and burdens of extended healthcare. Longterm care insurance is also cheaper if you buy it younger, but on the other hand you will be paying for it for many years before you are likely to need it. So weigh your options carefully.
In the United States, Medicaid provides care for the poor or those who spend down savings because of care and exhaust their assets. In most states, you must spend down to $2,000 (not counting your home and a few other necessities), depending on the rules of your state. If there is a living spouse/partner, they may keep an additional amount.
Additional Benefits of Long-Term Care Insurance
Many individuals are unable to rely on children or family members for support and buy long-term care insurance to help cover out-of-pocket expenses. Otherwise, long-term care expenses would quickly deplete the savings of an individual and/or their family. The costs of long-term care differ by region.
Premiums paid on a long-term care insurance product are usually tax deductible. The amount of the deduction depends on the age of the insured. Benefits paid from a long-term care contract are generally excluded from income. Some states also have deductions or credits and proceeds are always tax-free.
Business deductions of premiums are determined by the type of business. Usually companies that pay LTC premiums for an employee are 100 percent tax deductible, if not included as part of an employee's income.
Alternatives to Long-Term Care Insurance
Due to the high cost of this product, a number of alternative ways of paying for health needs in later years have come on the market. Think through what would make the most sense for you and your family—especially if you're a couple with a significant age or health difference that could affect your lives going forward.
If you don't have a financial advisor, this could be a reason to hire one who specializes in eldercare issues to work through these issues with you. If you can bear to face them, it makes sense to do your best to shape your own future, instead of leaving it to family members in the flurry of a health emergency.