Long-term care (LTC) insurance usually isn’t the first topic to come up in conversation at the dinner table. Many people find it challenging to move this financial planning issue to the top of their to-do list because it lacks the immediacy of health insurance and the certainty of life insurance. When it’s finally discussed, LTC has often already become an immediate need.
LTC insurance provides coverage for nursing and personal assistance costs related to chronic illness or disability. Such services are notoriously expensive, potentially wiping out one’s life savings. If you want to hedge your future care needs with insurance, review the following factors::
1. Social Security
- Nursing home or in-home care.Some LTC plans pay only for nursing home expenses and others only for in-home care. A more expensive policy will cover both types of care, plus assisted living or adult day care expenses.
- Understand the limits.Most LTC policies provide a monthly or daily benefit limit. Costs above this limit would be your responsibility. Policies also vary as to the timing of the coverage. A plan might require you to pay the first few months of care out of your own pocket (called the elimination period). Further, some policies will pay benefits only for a specific length of time, while others pay for life.
- Cost.LTC insurance is expensive, but there are two ways you can help ease the burden. First, establish a policy long before you begin having health issues. Old age and ill-health will lead to much higher premiums. The best time to buy a policy is probably many years before you are likely to need it.Second, seek a qualified long-term care policy that is eligible for a tax deduction. If you can write off the premiums, the tax savings will help offset the costs. The rules for deducting long-term care insurance premiums are complex, so get details before you buy.
- Company choice is important.The insurance company you choose can be as important as the type of coverage you buy. Research the financial soundness of potential insurance companies by reviewing their industry rating. And ask for references. You should shop and compare LTC policies like you would any significant purchase. Remember, you need this company to be around when you need their services.
It may be difficult to discuss the care you or your loved one will potentially need down the road, but it will be worth it.
© MC 2018