Long Term Care Insurance

The Basics

  • Long term care insurance, sometimes called nursing home insurance, can be an invaluable benefit for people with disabilities, especially those with progressive illnesses such as Parkinson’s disease.
  • The prospect of not having enough funds to live comfortably and safely in one’s later years can be harrowing, and a good long term care insurance policy can help create some sense of calm about the future.
  • Before evaluating long term care insurance coverage, you should first prepare a realistic budget and financial plan. You really need to this be certain you are within the appropriate spectrum of people who should consider coverage. For many people, coverage is too costly. It is not advisable to purchase coverage which you likely won’t be able to afford and then cancel it. Some people who consider long term care insurance coverage simply do not need it as they have more than adequate resources to pay for the care involved. For these people, they may nonetheless opt to buy coverage as a “luxury” purchase (simply because they want it and can afford it, not because they need it) or to use the long term care insurance coverage to protect their estate to leave to their children. If you are in between these two groups and can afford coverage and do not seem to be able to afford not to have coverage, then you should evaluate the many options that are available.
  • As with income replacement policies and other insurance vehicles, the benefits of a long term care insurance policy are contractual in nature. Long term care insurance policies are some of the most complex insurance policies to evaluate. The rates, future increases in rates, coverages, exclusion from coverage, etc. can vary significantly from one policy to the next.
  • The terms of the policy will thus govern when you are entitled to benefits, what you will need to establish your entitlement, etc.
  • If you have been diagnosed with Parkinson’s, immediately review in careful detail your long term care insurance policy. This is similar to the advice given elsewhere in this website about reviewing any disability income replacement policy in the event of your diagnosis. It is vital to review your policy because of the significant differences in policy terms. Also, when people first purchase long term care insurance coverage they often focus on cost, maximum benefits, the quality of the carrier, and other factors. When you are diagnosed, your analysis will differ. Now your focus has to be on whether the policy is in good standing, do you have to continue to make premium payments, are their options in the policy which you have or may elect which could affect coverage, what are the specific triggers for collecting (which is discussed in more detail below).
  • Typically, long term care insurance policies are triggered by a need for assistance of some significant level.

A long term care insurance policy will begin paying for care according to the terms of the policy. This can vary by contract:

  • In some cases, occasional help at home to assist with activities of daily living can trigger payments.
  • It may require a more moderate level of need, such as the need for regular in-home care.
  • It may require meeting a higher standard based on inability, similar to Social Security’s threshold.
  • Or perhaps a higher level must be established, such as medical certification of the need for nursing home care.

Shopping for long term care insurance policies

  • In shopping for long term care insurance policies, or later for applying for benefits, it is important to know the specifics of your policy, not only for the triggering event(s), but also how the benefits may be used.
  • Many long term care insurance policies will pay for care while you still live at home. Indeed, it is a mistake to call these policies nursing home insurance – they are that, but oftentimes much more.
  • Long term care insurance policies are typically capped at a contractual dollar amount, and will only pay up to the limits of your policy.
  • And in the case of a progressive illness like PD, the types of services they cover can burn through your eligible benefit quickly.
  • For many people, they are of great help, but not a financial solution.
  • Don’t only consider long term care insurance for the person with Parkinson’s but also for a caregiver spouse or partner. If you cannot qualify for new or additional coverage, your caregiver may.
  • Because of changes in the long term care insurance market many life insurance policies are now available that include long term care riders. You should investigate the benefits of these alternatives as well.
  • You may qualify for an income tax deduction for the premiums you pay on long term care insurance policies. Your premiums, up to a certain amount which varies each tax year and based on your age. You should add up all of your medical expenses and if all expenses, including the long term care insurance premium up to the maximum amount below, exceeds 10% of your adjusted gross income (AGI) you can deduct the excess as an itemized deduction. If you are 65 or older you can deduct medical expenses that exceed 7.5% of your AGI. Tip: Even if you did not keep track of medical expenses or long term care insurance premiums for deductions in the past, once you have been diagnosed with PD your medical expenses might increase, and your income decrease, so that you may now qualify for a deduction. So be careful in preparing this year’s income tax return based on  last years (or preparing information for your CPA  based on an organizer with last year’s information) since changed circumstances might change your ability to claim these deductions. The maximum amount of long term care insurance premiums you can deduct in 2015 are:
  • 40 or under $380.
  • 41-50 $710.
  • 51-60 $1,430.
  • 61-70 $3,800.
  • Over 70 $4,750.

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