Tag Archives: Myths

A Reality Check Concerning Long-Term Care

A Reality Check Concerning Long-Term Care

Despite all of the words written about longevity increasing the possibility of more people needing long-term care, there remain a number of myths surrounding the subject. The issue is so emotionally charged, that most people prefer to create their own reality about long-term care rather than face the truth. It is painful to admit that parents or other loved ones could someday have senile dementia, Alzheimer’s, or another debilitating disease that will change them from the person we know into someone vastly different.

In the event of a long-term care need, it’s important that the family stays focused on the emotional and physical needs of the person needing care. Having properly planned for this eventuality with insurance coverage allows them to do so. Many families assume that they will be able to handle the demands of long-term care on their own. What they don’t realize is that having the responsibility of being a caregiver has a major impact on your life. The demands often cause people to give up jobs in order to devote the necessary amount of time needed to provide care. It can also drive a wedge between family members if a spouse becomes an absentee parent because they are spending most of their time providing care for their own parent.

That’s why it is so important to have long-term care insurance to provide suitable care without placing undue stress on the family of the person requiring the care. While this makes sense in theory, many people are reluctant to purchase long-term care insurance because they believe certain fallacies about this type of coverage. The first is that you can pay for long-term care costs from your own assets. Many people believe that a reverse mortgage or stock portfolio can take the place of a policy. However, the cost of caring for an extended illness can easily wipe out one’s assets and bring a family to bankruptcy.

Many people also falsely believe that long-term care is only administered in nursing homes. In fact, the majority of people receive long-term care today in their own homes or community based facilities, not nursing homes. Depending on the policy, long-term care insurance can cover nursing home stays, home health care and community-based services.

When you are comparing policies, there are several factors to consider before making your decision:

·   The financial strength of the insurance company underwriting the policy.

·   The current cost of care in your area so that you can choose a daily benefit that will cover the needs of the person receiving the care.

·   The length of the benefit period. Since it is difficult to determine how long a person may require care, many people choose policies with lifetime benefits.

·   The number of days the policyholder will be responsible for paying out-of-pocket before coverage begins. This is known as the elimination or waiting period.

·   The inflation protection provided by the policy. This feature ensures that benefits provided by the policy will be adequate to cover future needs.

And finally, many people believe they can rely on Medicaid for long-term care. The policy changes to the Medicare program mandated by the Deficit Reduction Act of 2005 have made fewer people eligible to receive benefits. The safest course of action is not to wait and learn that your family member cannot qualify, but rather prepare for the future with a long-term care policy.

 

Top Five Long-Term Care Insurance Myths

Top Five Long-Term Care Insurance Myths

If you’ve decided to purchase long-term care insurance (LTCI), good for you. There’s no question that LTCI can help protect your family’s finances by covering the exorbitant costs of long-term care if and when necessary.

However, because LTCI is such an important and sometimes costly purchase, it’s vital that you do your research and buy a policy for the right reasons. Too many insurance companies persuade consumers to buy LTCI with exaggerated claims and unproven “facts.”

Don’t fall prey to these fallacies. When purchasing an LTCI policy, keep your eye out for these top five sales pitches:

  1. An LTCI policy is a valuable tax write-off.

This may be true in some cases, particularly for business owners, but this statement is a myth for many LTCI policy owners. Although premiums paid for a tax-qualified LTCI policy can ultimately reduce your tax bill, you have to itemize deductions to qualify.

Additionally, for tax write-off purposes, LTCI premiums fall into the medical and dental expenses categories. This category is limited to expenses that surpass 7.5% of your income. So, if you’re income is $75,000, you’ll need more than $5,625 in unreimbursed health and dental care expenses before you can even add in your LTCI premiums.

Plus, even if your LTCI premiums go above 7.5% of your income, you can’t include all of the payments in your medical and dental expenses deduction. Your premiums are deductible according to a sliding scale based on your age. Therefore, LTCI may not be such a great tax write-off after all—depending on your situation, it may not save you a single dime in taxes.

  1. Assisted-living facilities are all created equal.

This is definitely not true. Under current law, there is not a national standard definition for “long-term care facility.” Therefore, if your LTCI policy says it covers a stay in an “assisted-living facility” or “adult day-care facility,” this could mean something different depending on the particular policy and the state where the policy was created.

Therefore, if you purchase an LTCI policy and then move to another state, there’s a possibility that there are no facilities in your new state that match the definitions of your policy. Obviously, this could put you and your family in a serious bind if you ever require long-term care. Before you sign on the dotted line, ask plenty of questions and make sure you fully understand what type of facilities the policy covers.

  1. Buy now to lock in the price.

When purchasing an LTCI policy, many consumers are under the false impression that their premiums will be the same forever. Although your premiums typically depend on your age at the time you purchase the policy, this does not mean the premiums will stay the same for the life of the policy. Your premiums can go up any time your insurance company enacts a rate increase, as long as the increase is approved by the state insurance commissioner.

Additionally, LTCI is particularly vulnerable to rate increases because it’s relatively new to the insurance world. Insurance companies don’t have a sufficient amount of data to predict the number of long-term care claims they will face in coming years.

  1. You should replace your current LTCI policy with a newer one.

If an insurance agent pushes you to get rid of your current policy for a new one and he doesn’t explain the benefits of the switch, this should sound off alarm bells. More than likely, the agent is just looking to boost his commissions.

Although some LTCI policies may have an added benefit that your current policy doesn’t include, it’s typically not a wise move to switch policies in mid-game. First of all, your premiums are based on your age at the time you purchase the LTCI policy. Therefore, if you switch you to a new policy, your premiums will increase. On top of that, you may have developed a pre-existing condition since you purchased the first policy, and this may not be covered by the new policy.

If you want to add benefits to your policy, you’re probably better off to upgrade your current policy instead of buying a new one.

  1. An insurance company’s financial rating isn’t important.

If an insurance agent tells you a carrier’s rating isn’t important, run as fast as you can and don’t look back. You wouldn’t eat at a restaurant with an “F” health inspection grade, would you? For the same reasons, you shouldn’t do business with an insurance company that has low marks.

Before you buy an LTCI policy, check the company’s financial rating with Standard & Poor’s, Moody’s, A.M. Best, Fitch or Weiss—these are all reputable financial rating services. You may also want to contact your state’s insurance department for additional details on specific companies.