Long-Term Care Insurance

by Mark A. Krohn, Esq., Partner
Jacobowitz & Gubits, LLP

An alarming number of people mistakenly believe that their medical insurance, HMO, or Medicare will pay for long-term care. This is not the case. Medicare will only pay a limited amount for home health care and nursing home care under strict guidelines. Most people have no plan to pay for long-term care other than to pay from their own resources. These people are self-insuring a risk that could cost thousands or even millions of dollars. The odds of needing long-term care far exceed those of having an auto accident or that of your house being destroyed by fire. Still, most people would not consider being without auto insurance or homeowner’s insurance.

Fortunately, one may purchase “Long-Term Care Insurance.” The Health Insurance Portability and Accountability Act of 1996 gives support to individuals wishing to purchase Long-Term Care Insurance rather than risk a catastrophic financial loss. In general, the Act provides that benefits will be tax-free and premiums paid for “tax-qualified” policies will be tax-deductible subject to certain limitations. Further, employers can deduct the full amount of long-term care insurance premiums if such insurance is provided to employees.

Age is a primary factor in setting premiums. Your premium will be lower if you apply while you are young. Depending upon the company and the particular benefits selected, you can expect that the premium will increase by more than half between the ages of 50 and 60. At age 70, the premium could be four times higher than at age 50. Health is another factor in setting premiums. Changes in your health could cause your premium to be higher or even disqualify you from obtaining coverage.

When choosing Long-Term Care Insurance, it is important to consider a policy that provides comprehensive coverage for all levels of care, including home health care, adult day care, assisted living facility care and skilled nursing facility care. The basic benefits include the maximum daily benefit (e.g. $200. to $350. per day), the length of time during which the company will pay benefits (e.g. – 3 years, 5 years, or unlimited) and the waiting period after which the company starts to pay benefits (e.g. – 0 days, 20 days, 60 days, or 90 days). You may also select an inflation rider, which will protect you from the declining value of any policy due to the effects of inflation.

In summary, you need to examine your financial situation when considering Long-Term Care Insurance. Another issue to consider is whether you already have health problems. If you already have health problems, it may be difficult to obtain Long-Term Care Insurance. Finally, age is a factor. The younger you are at the time you purchase Long-Term Care Insurance the lower will be the premiums. Those who wait until they are over age sixty-five will face much higher premiums.