Napier & Company, LCC

With the costs of health and long-term care skyrocketing, we thought we would touch on the topic of Long Term Care Insurance. Digging through the details of these policies is not our idea of a good time, but getting an idea of how the policy will play out if the need should ever arise is crucial when choosing a long term care insurance policy.

What you need to consider:

Nursing home costs are averaging approximately $160 per day, depending on the region of the country.

Long term care coverage has become less expensive in recent years, but it still remains very costly. The average annual premium for a 65 year old ranges between $1,000 and $2,000, depending upon the features of the policy.

Don’t buy long term insurance if the high premiums pose more of a financial burden than an extended nursing home stay. As a general rule, it is wise not to spend more than five to seven percent of income on long term care insurance.

The tax issues:

 

Federal Taxes: Insurance premiums paid for qualified long term care are deductible as a medical expense. However, as many of you know, before even $1 of medical expenses are deductible, you have to have expenses that are over 7.5% of your adjusted gross income.

 

For example, let’s say you have total income of $100,000. Only your medical expenses over $7,500 (7.5% of $100,000) would be deductible.

 

State of Oregon: Oregon allows a special deduction for your long term care insurance premiums that is in addition to what you may receive at the Federal level.          

 

Consider a policy that pays for both nursing home stays as well as home care.

 

When looking at the home care benefits, look to see that it covers a wide range of services.

 

Beware of the lowest priced policy as it may offer inferior coverage and the premiums may increase when you are least able to afford to pay for them.

Beware of the potential for unaffordable price increases such as the “attained age” policies. These policies start

with low premiums that rise rapidly with the policyholder’s age.

 

Avoid policies that require a hospital stay of at least three days before the company will pay any nursing home benefits. This is due to the fact that many people go straight from their home to a nursing home without a hospital stay at all.

 

If purchasing coverage through an employer, be assured of continued coverage if there is a job change or if the employer terminates the plan.

 

Inflation protection is important. Choose a company that charges a level premium for inflation protection.

 

If purchasing a home care policy, buy one that covers aides who primarily help patients with personal or custodial care, rather than one that pays only for skilled care.

 

Beware of policies requiring that care be medically necessary for sickness or injury. Look for updated policies that use a disability standard. It takes into consideration medical necessity, cognitive impairment and ability to perform activities of daily living. The policy should also cover Alzheimer’s disease.

 

Obtain an outline of the major aspects of the policy to be purchased and make sure that the form numbers on the brochure match with the policy being quoted. 

Look for a policy containing a non-forfeiture clause. These policies are more expensive, but may be worth it. This option typically allows an individual to collect some reduced benefit if, for any reason, the individual stops premium payments after a number of years.