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Long-Term Care Insurance

What is Long-Term Care (LTC) Insurance?

It started in '80s as nursing home insurance. Policies now cover much more, such as home health services.
Long-Term Care (LTC) Insurance - Things You Should Know. What is it? Does Medicare cover LTC? What are the important elements of a LTC policy?

Is it affordable?

  • Long-term care insurance is not suitable for everyone. If you have trouble paying monthly bills, then it’s not for you.

Doesn't Medicare cover LTC?

  • This may be a consumer's biggest misconception. Medicare does not pay for LTC except in some very limited circumstances. Medicaid does cover it but you must "spend down" your assets to qualify. If you have assets to protect, consider LTC insurance as an option.

What is a tax-qualified plan?

  • Benefits paid under the policy (up to a certain limit) are not taxable as income. Premiums paid for the policy may be deductible from income as a health expense, but are subject to tax rules for health expenses.

Where do most people get LTC insurance policies?

  • Most consumers buy individual policies. Some employers offer group coverage. Some life insurance policies offer LTC coverage as a rider.

What are the important elements of a policy?

  • What services are covered.
  • In what type of facility or setting must the services be rendered (nursing facilities, care centers, assisted living facilities, etc.?
  • What is not covered (limitations and exclusions). Common ones include:
  • Preexisting conditions
  • Mental or nervous disorders (can't exclude Alzheimer's or dementia in most states)
  • Alcohol or drug addiction
  • Attempted suicide or self-inflicted injury
  • Benefit limits (daily/monthly/lifetime)
  • Benefit triggers (when the policy will pay). Benefits are typically triggered when the patient is unable to perform 2 or 3 Activities of Daily Living (ADLs) and have cognitive impairment. (ADLs include functions, such as bathing, continence, dressing, eating, going to the bathroom, etc.)
  • When benefits start (elimination period). Longer elimination periods equal cheaper premiums.
  • Inflation protection.
  • Nonforfeiture protection.

General shopping tips:

  1. Ask questions.
  2. Shop around. Check with several companies and agents.
  3. Take your time and compare outlines of coverage.
  4. Understand what you are buying.
  5. Don't be misled by advertising
  6. Don't be intimidated by an agent. If you feel pressured ask him/her to leave and report the incident to the Utah State Insurance Department.
  7. Don't buy more than one policy.
  8. Complete the application accurately.
  9. Never pay in cash.
  10. Get the name, address, and telephone numbers the agent and company.
  11. Review your policy during 30-day "free look" period. Make sure it's what you want.
  12. Check on the financial stability of the company.