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Frequently Asked Questions
Many people are surprised to learn that the range of insurance products and strategies extend beyond the traditional long-term care insurance policy. Hybrid products are becoming quite popular. Hybrid products are a blend of long-term care protection and either life insurance or an annuity. The popularity of these products stems in part from the fact that they eliminate the possibility of future rate increases and there’s a return of premium element in the event LTC isn’t needed.
Another insurance approach involves coupling a Chronic Illness Rider with a life insurance policy. Short-term insurance is a solution for some and there are even some strategies to assist folks who are actually at the point of needing care.
Not today, fortunately. Virtually all long-term care insurance products in the marketplace right now will provide coverage for expenses incurred in not only nursing homes (also called skilled nursing facilities) but in assisted living facilities, at home and even for hospice care.
The cost will, of course, depend on the level of care needed and may vary from provider to provider. Not surprisingly, the geographic locale of the facility plays a major role in determining costs. We create a spreadsheet each year for our clients in the greater Quad-City area which gives the most up-to-date median cost of care across various settings in selected cities. Please see the RESOURCES page on this website to view the report.
A number of traditional long-term care policies sold up until four or five years ago were underwritten based on what turned out to be inaccurate assumptions. Many insurance companies underestimated the longevity of Americans and the cost of their care. They also underestimated the lapse rate and, understandably, did not predict the protracted low investment return environment of recent years. In addition, the medical underwriting was somewhat more lax than it is today. The result: a “perfect storm” that caused policies written at that time to be, in retrospect, underpriced. The policies being sold today are more appropriately priced and most industry experts believe today’s policies are much less likely to experience rate increases in the future.
Nearly all long-term care policies sold today are “tax-qualified”, meaning they meet certain standards set by the Health Insurance Portability and Accountability Act (HIPAA). Among those standards is a provision which states that policies cannot be canceled nor can the premiums be increased because of age or a decline in mental or physical health. Your premium could increase, but only if that increase is applied to an entire group of policyholders due to higher-than-expected claims and only if the state insurance department approves the increase.
A number of factors come into play when determining the cost of long-term care insurance, including your age when you buy, your health history, the type of policy and the policy options you choose. The younger you are when you buy a policy, the lower your premium will be. How you elect to design your policy will, of course, affect the cost. The flexibility to choose your own features such as the lifetime benefit amount, the monthly (or daily) maximum, the amount of inflation, etc. allows consumers to design a plan tailored to their own objectives and budget.
Yes. We represent three companies that have such products.
Yes, depending on the insurance company and depending on the policy type. Generally, the premium would be returned at your death to your beneficiary.
Recognizing the importance of having Americans own private long-term care insurance, the government has put into place some attractive tax laws to encourage us to plan for our care. One of those incentives can be found in Section 1035 of the Internal Revenue Code. The provisions in that section allow taxpayers to exchange, tax-free, life insurance cash value and non-qualified annuities for long-term care insurance.
Other tax incentives include the federal deductibility of LTC premiums in certain circumstances and state income tax credits in certain states. Certain long-term care insurance premiums can be paid through your Health Savings Account (HSA) and the premiums paid for qualified LTC policies can often be considered a business expense.
Several states participate in the Partnership Program which is designed to incentivize the purchase of private long-term care insurance. For more information about this program and a map showing which states currently participate, see the RESOURCES page of this website.
Most LTC insurance products are acquired by folks when they are between the ages of 50 and 70. We have helped several clients in their mid-seventies, however, to find suitable plans. That said, the best time to set a plan in place is while you’re still reasonably healthy. That’s because most long-term care insurance products are medically underwritten. The older you are the greater the chance you may develop a medical condition that will make the purchase more expensive or cause you to be ineligible altogether.
“Pat, I wanted to take a moment and again thank you for your long-term care services to many of our clients and also members of my family. Your prompt communication, clear outline of possible coverages and excellent follow up is appreciated.
I have received calls and comments from clients thanking me for my suggestion to call you. The expense of long-term care is a frightening issue for many. Your compassionate yet “to the point” style and your thorough knowledge of this important protection is appreciated.”
