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Consumers & Individuals
Long Term Insurance 101
What
is Long Term Care Insurance?
Long Term Care Insurance (LTCI) is designed to provide care and services
to an individual with a long physical illness, disability or cognitive
impairment. Long Term Care services help a person with their activities
of daily living, such as dressing, bathing, eating, and toileting. LTCI
allows a person the flexibility to receive their care in a variety of
settings, including home health care, respite care, adult day care, nursing
home and assisted living facilities.
Why Long Term Care Insurance?
Long term care in the home or a skilled facility is exceedingly expensive,
and continues to grow at a pace faster than inflation. The average annual
stay in a nursing home starts at $50,000/year to $130,000. When you contact
us, we will provide you with a cost analysis based on your specific
region.
LTCI provides peace of mind for you and your family by:
•
Offering
a wide variety of plan designs to meet your needs
•
Protecting
savings and assets
•
Developing
a budgeted way to pay for quality care
•
Allowing
freedom of choice to receive care where YOU want
How Does It Work?
Long term care benefits under an LTCI policy are paid when certain physical
or mental benefit "triggers" have occurred, and after a minimum
waiting period has been met. Both of these conditions are in place to
certify that the insured needs the level of care outlined in an LTCI policy.
The policy owner, and likely his or her family, decide on the most appropriate
setting for care (home, assisted living, nursing home), and then based
on the plan design the insurance company pays the appropriate benefits.
Why People Buy!
Asset Preservation
Most would prefer to leave their hard earned assets to their children,
grandchildren or favorite charity rather than spend it on long-term care
services.
Family
Many want to ensure the financial security of a surviving spouse or protect
against becoming a physical or financial burden on their children.
Quality of Care
Many people do not want to rely on the Medicaid/Welfare system to provide
care. They do not want to lose their independence or choice of who cares
for them and how and where that care is provided.
Financial Safety Net
People want to ensure that the necessary funds will be available no matter
how long care is needed.
Do I Really Need Insurance?
While the likelihood of needing long term care continues to grow, LTCI
is not for everyone. What is critical, of course, is to determine HOW
you will cover the cost care when the need arises. Medicare provides only
very limited coverage, in terms of amount of days they will pay, benefits
they will cover and place where the care will be provided.
Medicaid covers such services once an individual has "spent down"
his/her assets to poverty levels, and then only at selected facilities.
So those who are neither rich nor poor are left to either self-insure
against this risk, or to purchase LTCI.
The Risk of Needing Long-Term Care
Long-Term Care is pervasive in today's world. Below you will find statistics
from studies that demonstrate just how pervasive the need for long-term
can be. The use of statistics during your presentation is not recommended.
Many people do not respond well to being lumped in a statistical group.
The general tendency is for them to believe they are among the percentage
it will not happen to. The statistical numbers listed below are to help
agents understand the validity and need for long-term care insurance.
Over 50% of all Americans will need long term care in their
lifetime.
(Americans for Long Term Care Security, August 1999)
For
a couple turning 65, there is a 75% chance that one of them will need
long term care. (The Wall Street Journal, June 2000)
Over 70% of people with Alzheimer's live at home and receive 75% of the
assistance they need from family and friends. (Understanding Alzheimer's,
Alzheimer's Association, 1999)
Of the 13 million Americans who received care in 2001, 40% were between
the ages of 18 and 64. (Americans for Long Term Security, Did You Know,
July 2002)
It has been estimated that 80% of all people age 65 will need nursing
home, assisted living, home or community care during their lifetime. (Brooking/ICF
Long Term Care Financial Model, 1995)
60% of all Americans who reach age 65 may need long-term care at some
point in their remaining lives. (The Looming Crisis, American Health
Care Association, 2000)
50% of employed caregivers gave up work either temporarily or permanently and about 30% experience mental health problems due to care giving. (The New England Elder Life Planning Symposium, 1999)
How Much Does LTCI Cost?
The cost of an LTCI policy can vary greatly, depending on the selection
of the many variables that go into creating a plan design, including:
•
Elimination
period
•
Daily
benefit amount
•
Types
of facilities where care can be provided
•
Inflation
protection
•
Non-forfeiture
benefits, and more.
The annual premium for LTCI policies can be as much as $2,000 or more for a person aged 65. Premiums will be lower if you are younger, higher if you’re older.
What Services Are Covered?
•
Nursing
home care
•
Home
health care
•
Personal
care in your home
•
Services
in assisted living facilities
•
Services
in adult day care centers
•
Services
in other community facilities
Are There Any Tax Benefits?
There are important tax benefits to LTCI, both for businesses and individuals.
C-Corporations are entitled to treat LTCI premiums as a fully deductible
business expense (whether the premium is paid by employer or employee),
and the benefits are received tax-free. Individuals that itemize their
deductions can deduct premium payments, based on age, as part of annual
medical expenses. S-Corporation owners are treated similarly to individuals,
allowing for 100% of the same deduction in 2003 and beyond, based on age
of the insured.
In addition, there is promising legislation currently being evaluated
by Congress that may allow individuals a top-line tax deduction for annual
premiums.
It is important to understand that Quantum does not
provide legal and tax advice, please consult with your legal or tax professional
for the most up to date information for your particular need. We do work
with firms that we can put you in touch with for those needs, if you require
additional assistance.
