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Long Term Care Insurance
Ten years ago, not many people heard of Long Term Care (LTC) insurance. Now, it is advertised as a must have insurance product. According to a U.S. Census Bureau study (1996), people over 50 years of age outnumber people less than 50 years of age. As people live longer, the more likely they are going to require LTC. Long Term Care insurance is becoming increasingly popular as a no cost or low cost benefit that can be offered by employers as a fringe benefit. In 1997, The National Council on Aging conducted an employee survey, which reported that 70% of the respondents wanted their employers to offer Long Term Care Insurance. What exactly is LTC insurance? Long Term Care insurance is Asset Protection designed to protect an individual from spending down their accumulated wealth due to the high cost associated with either a Nursing Home or Home and Community-Based Care. Long Term Care Insurance is not an insurance product for everyone as it can be quite costly to purchase. When LTC is offered as a fringe benefit by an employer, it is not subject to any discrimination guidelines or testing. Most insurance carriers offer LTC insurance as an individual product not a group product. Employers may purchase a LTC policy for a designated class of employees and the cost of the LTC policy can currently be deducted as a business expense. LTC policies that are "tax qualified" are exempt from income taxes when the benefit is paid out to the recipient. Individual insurance is not written on a "guarantee issue" basis; each application for LTC requires a release of medical information before the policy is underwritten. There is always the possibility that an individual's application will be rejected. There are, however, insurance carriers that offer a true "group" Long Term Care insurance product (usually for employers with 500 or more employees). These LTC group insurance plans are guaranteed issue as long as the employee is actively at work. When purchased as an individual policy, LTC insurance allows each participant to customize his or her policy. The following aspects of the LTC policy can be modified: the Maximum Daily Benefit, the Lifetime Maximum Benefit, the Waiting Period/Elimination Period, Inflation Protection Option and the Non-Forfeiture of Premium Option. Each of these modifications has an associated cost and will impact the overall premium for a LTC policy. There are different services that could fall under the definition of LTC. These services include either Institutional Care at a staffed Nursing Facility or Non-Institutional care, such as Home Health Care, Personal Care, Adult Day Care, Long Term Home Health Care, Respite Care & Hospice Care. A common measure insurance companies use to decide whether someone would be eligible for the LTC benefits is the inability to perform two or perhaps three "activities of daily living" (ADL's). The most common ADL's used by insurance companies are: bathing, continence, dressing, eating, toileting, and transferring (from bed to chair). As each year goes by, Nursing Home and Home Care charges increase. Therefore, the daily dollar amounts that are payable under these policies should increase to keep pace. For this reason, the Inflation Protection Option is a very important rider to be included in a LTC policy. Insurers selling LTC policies in New York State are required at the time of sale to also offer an "Inflation Protection" benefit. All insurance carriers that are members of the "New York State Partnership for Long Term Care" must include an Inflation Protection benefit of at least 5% compounded annually, unless the policy is purchased at age 80 or above. Another important component of the LTC policy is the financial stability of the insurance company. Long Term Care claims may not be paid for twenty or more years after a LTC policy is purchased. An important factor to consider about the insurance company is its financial condition. One should look at both the current financial strength and historical financial history. |
