Long-Term Care Insurance Benefits
(Designing coverage that works for you)
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Long-term care insurance covers the cost of services when you need help with basic activities like eating, bathing, and dressing. Long-term care insurance pays benefits for home health care, adult day care centers, assisted living, and nursing homes.
Long-term care policies also have additional benefits that are available. These optional benefit riders are a way to customize a long-term care policy to your needs.
| Terms | |
|---|---|
| Daily benefit | Cash benefit per day: usually paid monthly. |
| Benefit Period | How long benefits are paid: usually 2 years, 5 years, or lifetime. |
| Waiting period | When benefits begin after eligibility: usually 30, 60, 90, or 180 days. |
| Activities of daily living | Used to determine eligibility for claims: eating, dressing, bathing, toileting, transferring, continence. |
| Cognitive disorders | Diseases that affect memory, learning, perception, and problem-solving. Dementia and Alzheimer's are cognitive disorders. |
| Indemnity long-term care policy | Benefit is not limited to actual cost of care. |
| Reimbursement long-term care policy | Benefit is limited to actual cost of care. |
| Nonforfeiture option | Value of policy if canceled. |
| Guaranteed renewable | Insurance company cannot cancel the coverage if the premium is paid. They can raise the premium under certain conditions. |
| Skilled care | Skilled care is nursing and therapy care provided by medical professionals. |
| Custodial care | Non-medical assisting activities of daily living. |
Contact an independent insurance agent. Learn how to protect yourself and your retirement plan from the cost of long-term care.
Restore Your Benefit Period
The restoration of benefits rider resets your maximum benefit period if you need care and then recover. The benefit will reset after you have recovered and are no longer eligible for benefits. The wait period is usually 180 consecutive days.
Upgrade to Indemnity Coverage
Most long-term care policies pay benefits by reimbursing the actual cost of care up to the policy maximum benefit. Reimbursement policies typically will only pay for care by a licensed provider.
Indemnity policies pay the maximum daily benefit as long as you are eligible. The benefit may be used for any purpose including paying family members providing care.
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Plan for Inflation
Inflation riders increase your daily benefit every year or at specific times. A simple inflation rider increase is a percentage of the original benefit, and the benefit increases by the same amount every year. A compound inflation rider increase is a percentage of the previous year’s benefit. The increase goes up every year.
Deferred inflation riders offer additional coverage for purchase at specific times. You can accept the coverage at an extra cost or decline it.
Share Benefits with Your Spouse
The shared benefit rider gives a couple access to unused benefits. If your spouse requires care and exhausts their benefits, they can access any of yours that have not been used. If one spouse dies, their benefit is transferred to the remaining spouse.
Each spouse must buy identical policies.
State Long-Term Care Partnership Programs
Medicaid is a state-administered federal poverty program. Medicaid pays for 43% of all long-term care cost in the US, but you have to qualify. Most states have a maximum of $2,000 of countable assets for individuals and $3,000 for couples.
And over the years Uncle Sam has tightened up on giving away assets to qualify for Medicaid. Not all providers accept Medicaid patients.
Most states have long-term care partnership programs. The partnership program works like this. You will purchase a traditional long-term care policy that qualifies for the partnership program. Don’t worry, the insurance company tells you if it does.
When you need long-term care, the policy will pay out the benefits. And if the policy benefits run out, you can apply for Medicaid. You can keep $2,000 plus an amount equal to the benefits paid out by the long-term care policy.
Partnership policies are similar in each state except for California, Connecticut, Indiana, and New York. Each of them has specific benefit requirements that differ from the other states.
Are Tax Benefits Included in Long-Term Care Insurance?
If your long-term care policy meets the requirements for tax qualified, the premiums may be tax deductible. Your long-term care premiums are considered medical expenses. For 2019, you can deduct medical expenses on more than 10% of your adjusted gross income.
The IRS limits how much of your long-term care policies can be included in medical expense
| Age | Maximum Deduction |
| 40 or less | $420 |
| More than 40 but not more than 50 | $790 |
| More than 50 but not more than 60 | $1,580 |
| More than 60 but not more than 70 | $4,220 |
| More than 70 | $5,270 |
Long-term care insurance benefits are tax free up to the greater of $370 per day and the actual cost of care.
Are There Additional Long-Term Care Benefits I Can Apply for?
If you are a veteran, you may be eligible for the aid and attendance benefit. Veterans and survivors who are eligible for a VA pension may be eligible for additional payments if they require the aid and attendance of another person or are housebound.
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Why Go It Alone?
Long-term care insurance is an important part of smart retirement planning. There is a lot to know about the coverage. Contact your local independent insurance agent. They can simplify the process for you.