A Long Term Care insurance policy is an insurance policy designed to provide some pre-determined level of income for some pre-determined period of time after the insured pays a pre-determined deductible. The proceeds from a Long Term Care insurance policy are for the purpose of paying for Home Health Care, Adult Day Care, Assisted Living Facility Care and/or Nursing Home Care if/when the insured has satisfactorily demonstrated the inability to perform two out of six activities of daily living.
What are the six activities of daily living (ADLs)?
- Transferring (walking)
Most people are unaware that there are several different forms of Long Term Care insurance available. Among the different forms are:
- Traditional Long Term Care insurance
- Asset based Long Term Care insurance
- Life Insurance based Long Term Care insurance
- A combination of the above
Long Term Care insurance overview:
Acute Care Vs. Chronic Care - Acute care is typically defined when used by insurance companies as “care for illness or injury that has developed rapidly, has pronounced symptoms, and is finite in length.” Acute care continues until a patient achieves Maximum Medical Improvement (MMI).
Chronic care is defined as “care for illness continuing over a long period of time or recurring frequently.” Chronic conditions often begin inconspicuously and symptoms are less pronounced than acute conditions. Long Term Care Insurance is designed to assist people who have loss of capacity due to chronic illness.
Thus, acute care is typically provided in emergency rooms, clinics, hospitals, and sometimes at the patient’s home. Health insurance and Medicare cover some or all of these types of medical expenses. Chronic care is provided in nursing homes, extended care and assisted living facilities, and at the patient’s home or the home of friend or family member. This type of care is not covered under
traditional health insurance and Medicare because it does not meet the definition of acute care.
Tax Qualified Long Term Care Insurance means that the benefits (income) from the policy are not taxable as income. In order for a Long Term Care Insurance policy to be tax qualified it has to meet the definitions as put forth by Congress. Because of this, all tax qualified Long Term Care Insurance policies are essentially the same. If you own qualified Long Term Care Insurance, you can tax deduct the premium payments up to a point. Please consult with a tax advisor for your specific situation.
An integrated Long Term Care Insurance policy is a policy that covers all four of the following levels of care.
Nursing Home Care (Medicaid typically only covers this type of care)
Adult Day Care
Assisted Living Facility Care
Home Health Care
The four primary decisions that have to be made when designing a Long Term Care Insurance policy are:
The benefit period, which determines how long the insured receives benefits from the policy,
The daily, weekly or monthly benefit amount, which determines how much daily, weekly or monthly income is paid by the policy,
The deductible (elimination or waiting period), which determines how many days the insured pays for their own care before the Long Term Care Insurance policy starts paying, and
The inflation strategy, which determines whether or not the income benefit from the policy is increased by some form of inflation calculation.
In order to qualify for benefits from a tax qualified Long Term Care Insurance policy, the insured has to have demonstrated the inability to perform two out of six of the following activities of daily living (ADL), which are bathing, continence, dressing, eating, toileting, and transferring.
If you would like to discuss your existing Long Term Care insurance policy, or if you would like to discuss applying for Long Term Care insurance, please refer to the “Contact Us” section of our website. We welcome the opportunity to sit down with you to discuss your Long Term Care insurance needs.