|
|
Introduction LTC | LTC Basics | LTC Funding | LTC Quote | LTC Links
Paying For Long Term Care  Assisted Home Care
This type of private insurance policy can help pay for many types of long-term care, including both skilled and non-skilled care.
Long-term care insurance coverage can vary widely. Some policies may cover only nursing home care. Others may include coverage for a whole range of services like care in an adult day care center, assisted living, medical equipment, and formal and informal home care.
Long-term care insurance premiums vary, depending on your age and health status when you buy the long-term care insurance policy and how much coverage you want. Additionally, you must be in generally good health to pass underwriting when purchasing a policy. For this reason, it may be better to buy long-term care insurance at a younger age when premiums are lower. If this is done, a periodic review is advised to make sure your policy covers your current and future long-term care needs. But you can buy long-term care insurance at any age. Talk about this with a family member, insurance agent, or financial advisor to learn what is best for you.
The cost of care, especially in nursing homes and assisted living facilities, varies from state to state. Make sure that the long-term care insurance policy you buy will cover the costs of care where you plan to use it.
Most long-term care insurance policies offer certain tax benefits. These policies are called Tax-Qualified, or TQ, policies. Depending on your age, you can include some or all of the premium for a TQ policy as a medical deduction on your Federal income tax form if you itemize your deductions. Also, when you receive payments from a Tax-Qualified policy, you generally donęt have to pay Federal tax on them.
Private insurance companies sell long-term care insurance policies. You can buy them from an insurance agent or through the mail. Or, you may be able to buy a group policy through an employer or through membership in an association. Insurance companies may let you keep coverage after your employment ends or your employer cancels the group plan. You may be able to continue your coverage or convert it to another long-term care insurance policy.
The Federal Long-Term Care Insurance Program (FLTCIP) offers Federal and U.S. Postal Service employees, and annuitants, members and retired members of the Uniformed Services, their spouses and other qualified relatives the opportunity to buy long-term care insurance at a group rate. Under this program, insurers that are selected and approved by the Government will make long-term care insurance policies available to those individuals who qualify.
Limited-Pay Long Term Care Policies
Some insurance companies offer payment options in which premiums are paid for a limited period of time, rather than over the life of the policy. Rather than paying premiums as long as the policy stays in force, payments are made for a predetermined number of years or up to a certain age. Common examples are:
-
Single pay - one premium payment
-
Ten pay - paying premiums for 10 years
-
Twenty pay - paying premiums for 20 years, and
-
To age 65 - paying premiums until insured turns 65
You can use cash, certificates of deposit (CDs), annuities, or other resources to buy a limited pay/long-term care policy. For example, if you purchase a policy that offers a single premium payment, you are guaranteed that there wonęt be any additional premium charges. The policy includes a set amount of money for your long-term care needs. The longer you have the policy and donęt file a claim, the more money you will have for your future long-term care needs. These policies also pay a death benefit to your heirs (family or friends).
Listed below are some opportunities and requirements/limits of limited pay/long-term care policies:
|
Limited Pay/Long-Term Care Policies Opportunities: |
Limited Pay/Long-Term Care Policies Requirements/Limits: |
|
You can pay for your long-term care needs within a specified shortened period. |
Limited pay options add to the premium amount, sometimes rather significantly. |
|
Your heirs (family or friends) may get paid a death benefit. |
If you buy a long-term care policy at a young age, your policy may not cover your long-term care needs, as you get older. Make sure your policy will cover your current and future long-term care needs. You should talk with your financial advisor before buying a long-term care policy. |
|
You might be able to move money from your life insurance policy to this policy without paying any tax penalties. For more information, you should check this out with the Internal Revenue Service (IRS). |
To keep pace with rising long-term care costs, you might need to purchase additional coverage or buy a rider for inflation (future price increases) and have to keep making these additional payments. |
Page Last Updated: December 09, 2004
Accelerated Death Benefit
An Accelerated Death Benefit (ADB) is a benefit that can be added to your life insurance policy. It can provide cash advances against your death benefit while you are still alive. You can use this benefit if you have a terminal illness, need nursing home care permanently, or can not perform activities of daily living for yourself. Some examples of activities of daily living include eating, bathing, dressing, and using the bathroom. There might be spending limits (caps) on ADB policies. You may want to check this out before getting an ADB policy.
Listed below are the opportunities and requirements/limits for ADB:
| ADB Opportunities: |
ADB Requirements/Limits: |
From one insurance policy, you can benefit in two ways:
1. Paying for your long-term care needs.
2. Leaving a death benefit to your heirs (family or friends). |
These policies can only be used if you have a terminal illness, need nursing home care permanently, or can not perform activities of daily living. There may be limitations on these polices. |
| If you get an ADB at the time when you buy a life insurance policy, it may help you later because you might not qualify for a long-term care policy at an older age. |
You must continue to own your policy and pay the premiums. |
| You can add an ADB benefit to a life insurance policy for little or no additional cost. |
The face value of your life insurance policy might not be large enough. In this case, the ADB payment wonęt be enough to pay for your long-term care needs. |
| |
Compared to long-term care insurance, the monthly benefit from an ADB policy might be lower and the coverage period is usually shorter. |
| |
These policies usually don't offer an inflation (future price increases) protection. |
| |
If you need a lot of health care and use the ADB, there may be little or no death benefit for your heirs (family or friends). |
| |
You might not be eligible for Medicaid. |
| |
You might not have enough coverage if you need long-term care for an extended period of time. |
Page Last Updated: December 09, 2004
Life Settlement
A life settlement means you can sell your life insurance for the present value of the policy. This is usually done when the original reason why you bought your life insurance policy no longer exists. For example, you have a life insurance policy and you get divorce. You might be able to sell the life insurance policy for present value. The money from the sale can be used to pay for your long-term care needs.
To be eligible for this, you can not be ill and must be over age 70 (for females) or over age 74 (for males). In some situations, if your life expectancy is 12 years or less, a life settlement can be made at a younger age.
Listed below are some opportunities and requirements/limits for life settlements:
| Life Settlement Opportunities: |
Life Settlement Requirements/Limits: |
| You can use the money from the sale of your life insurance policy to pay for your long-term care needs. |
The money you get from selling your life insurance policy is taxable. For more information, you should check this out with the Internal Revenue Service (IRS) before selling your life insurance policy. |
| If you do not need long-term care, you can leave something to your heirs (family or friends). |
Depending on how much money you get from selling your life insurance policy, you may not have enough money to pay for all of your long-term care needs. |
| If you do not qualify for long-term care insurance, this may be an option to pay for your long-term care needs. |
|
Page Last Updated: December 09, 2004
Viatical Settements
If you are *terminally ill or chronically ill, you might be able to sell your life insurance policy to another person (a third party). You usually have to sell your life insurance policy for a lower amount of the full face value. The amount that is paid is usually based on the remaining life expectancy of the insured (you). The death benefit usually ranges from 50 percent to 80 percent. When you die, the third party will get the full death benefit.
Before making a final decision to make a viatical settlement to pay for your long-term care needs, you may want to contact your State Attorney General Office or your State Department of Insurance.
Listed below are some opportunities and requirements/limits for viatical settlements:
| Viatical Settlements Opportunities: |
Viatical Settlements Requirements/Limits: |
|
You can get money immediately, although it will be less than your original death benefit. You can use the money to pay for your long-term care needs. |
If you live longer than expected, you might need more money to pay for your long-term care needs. |
|
If you do not qualify for a long-term care policy, this might be an option for you to pay for your long-term care needs. |
The settlement costs might not be enough to pay for your long-term care needs. |
|
After making the settlement, you do not need to continue making premium payments for your life insurance. This is because you donęt own the policy. |
The death benefit will go to the third party. You will not be able to leave anything to your heirs (family or friends). |
|
This may be tax-free. For more information, you should check this out with the Internal Revenue Service (IRS). |
Most people canęt get these types of settlements because their life expectancy is considered to be more than five years. |
*The definition of a terminal illness may vary among insurers, providers, and states.
Page Last Updated: March 31, 2005
|
 |