WorkingAmericanBenefits™

Long Term Care Insurance

Insurance to pay for your care when you suffer a physical or mental condition, whether acute or chronic, which impairs your ability to perform two or more of the six Activities of Daily Living (ADL) - eating, dressing, toileting, bathing, continence and transferring (to and from your bed).  In addition, a cognitive impairment (such as Alzheimer's disease) can trigger Long Term Care Insurance (LTCI) benefits.  Long Term Care Insurance pays to help you (the recipient) live as you live now. In addition to paying for help with the activities of daily living for the recipient, LTCI pays for home health care, respite care, adult day care, care in a nursing home and assisted living facilities care.

Long Term Care is quite expensive - hence the need for Long Term Care Insurance(LTCI) to aid individuals and families pay for Long Term Care.  In 1997, the average cost of Long Term Care in a Nursing Home nationally, was $46,000 annually¹. The cost of a nurse administering care at home to a recipient 3 times per week for 2 hours per day for a year would be about $19,300 annually².  Nationally, the average cost of a Home Health Aide is just under $17 per hour³.  Today, the cost of Long Term Care is even higher.  A 2003 survey done by GE Financial's Long Term Care division show that a year in a nursing home cost approximately $85,000 or more in the nations' most expensive areas. The most expensive area in the country, Alaska, cost $166,700 for a year's care, and the least expensive, Louisiana, cost $35,900.

The decision to purchase Long Term Care Insurance(LTCI) should not be taken lightly.  Great care should be taken in determining whether or not LTCI is for you. When buying LTCI, consider these findings from a 1990 national study:

• Of the approximately 2.2 million people who turned 65 in 1990, more than 900,00 (43%) are expected to enter a nursing home at least once before they die.

• Among the people who live to age 65, 1 in 3 will spend 3 months or more in a nursing home; about 1 in 4 will spend one year or more in a nursing home; and about 1 in 11 will spend five years or more in a nursing home.  In other words, at least 1 in 3 people who turned 65 will spend at least 3 months in a nursing home.

• Women are more likely to need nursing home care than men.  The 1990 study projected that 13% of all women will spend 5 or more years in a nursing home, while only 4% of all men will spend that much time in a nursing home.

According to the 1999 Shopper's Guide to Long Term Care Insurance put out by the National Association of Insurance Commissioners, you should only consider buying Long Term Care Insurance if:

• You have significant assets and income, but don't want to use them to pay for Long Term Care.

• You want to protect some of your assets and income - especially from Medicaid Spend-down

• You want to pay for your own care because you want to stay independent of government aid or the help of family and friends.

When buying Long Term Care Insurance (LTCI), consider choosing between a "tax-qualified" or a "non tax-qualified" policy.  A federally tax-qualified LTCI plan offers certain federal tax advantages.  If you itemize your deductions, you may be able to deduct part or all of the premium you pay for the policy.  The premium amount that qualifies as a deductible medical expense is limited by the individuals attained age before the close of the taxable year.  In 2004, they were as follows:

• 40 or less                                                         $240

• More than 40 but not more than 50            $450

• More than 50 but not more than 60            $900

• More than 60 but not more than 70         $2,390 

• More than 70                                               $2,990

Starting in 2003, a self-employed individual may deduct 100% of the premiums paid for Long Term Care Insurance.  The 1996 Health Insurance Act as well as the Taxpayer Relief Act of 1997, allows a self-employed person to deduct eligible LTCI premiums.

Whether you choose a "tax-qualified" or a "non tax-qualified" policy, you should make sure the benefits and the triggers will meet your needs:

• The first thing to look for when buying LTCI is a quality company.  The company should have been in business for a reasonable long period of time, and should be committed to the LTC business.  Check the company's rating and its claims-paying ability.

• Second, make sure the package of services the company offers meet your particular needs - don't settle for less.  Consider where you live and where you will retire.  Make sure that your policy can pay for the cost of services in a nursing home, assisted living facility, at home, or where ever your services will be rendered.  Make sure your policy covers Bathing as one of the six ADL's.  Bathing is the first ADL most people lose.  Also, make sure that cognitive impairment is an alternative trigger. State laws specify benefits for Alzheimer's and other nervous and mental disorders as critical elements of a LTC policy.

• Third, your policy should have an inflation rider or gives you the option to increase the coverage in the future.

• Fourth, treat at-home care as importantly as nursing home care.  Most people prefer to stay in their homes  when receiving LTC.  Both types of care are expensive.  Therefore, make sure that your policy pays just as much for at-home care as it pays for nursing home care.

• Understand how the policy works.  Who determines when you receive benefits?  The insurance company's doctor or an independent doctor?

• Make sure your policy is guaranteed renewable and includes a bed reservation.

• Select a company that will accept you with your health history and not rate you up.

• Select an affordable plan.  It's better to have coverage to pay for some of your care than to have no coverage at all.

• START YOUR COVERAGE NOW!  Premiums are much lower for younger buyers than it is for older ones.  Today is the youngest you'll ever be, so today is the least expensive your premiums will ever be.  It makes sense to purchase LTCI years before you are likely to need it.

Your best sources of  Long Term Care Insurance:

• CNA Insurance Company
• Kanawha Insurance Company
• ALLIANZ Life Insurance Company
• Physicians Mutual Insurance Co.
• UNUMPROVIDENT
• John Hancock Life Insurance Company
• State Life Insurance Co.
• Great American Life Ins. Co.
• GE Capital Assurance Company

Levit, K. R., Lazenby, H. C. et al.: National Health Expenditures, 1996. Health Care     Finance Review:18(1):175-214.

National Association of Home Care, Washington, DC 1997.

Ibid.

Agent's Sales Journal, Fourth Quarter 2003, FL Edition, Pg 22.

Levit, K. R., Lazenby, H. C. et al.: National Health Expenditures, 1996. Health Care Finance Review:18(1):175-214.

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