2 minute read
long-term care insurance
LTC Insurance In a Nutshell
BY LYNN LAVENDER
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If you have aging parents or have otherwise witnessed first-hand the high cost of long-term care, you may understandably be asking yourself how you will handle the cost of care for yourself – since it is not covered by Medicare.
The following is a brief high-level look at different types of long-term care insurance.
TRADITIONAL LONG-TERM CARE INSURANCE (LTCI) is pure insurance. That means the insurance company will pay if “damages” are incurred. If benefits are never needed, there is no residual benefit. Traditional LTCI is also the most flexible with many features: ranges of benefit dollars, how long benefits last, shared benefits with partners and more. These plans are tax qualified, meaning they have federal and state tax advantages. However, rates are not guaranteed and could increase if approved by the state department of insurance. You will also want to exercise the inflation rider; otherwise, the policy is akin to owning a depreciating asset.
HYBRID OR ASSET-BASED plans were created for people who feel they might be throwing away money if they never need care. If long-term care is never needed, a life insurance benefit to named beneficiaries will be paid. These plans have limited payments (lump sum or multiyear payment schedules) and guaranteed premiums. Benefits are not taxable but there is no tax deductibility on premiums. Hybrid Plans do not have as many options as traditional policies.
LIFE INSURANCE WITH LIVING RIDERS are life insurance policies that allow the insured to draw down on the death benefit for their own use if they meet the criteria of being chronically ill (the individual’s prognosis is permanent) or need long-term care. These policies do not have inflation riders. (There are two types of long-term care riders on the life insurance with living benefits: the "Chronic Illness Rider" and the other is a true "Long Term Care" rider. Be sure to know the difference.)
No matter how much money you have, you will not be able to buy insurance if you are not healthy. Investigate your options while you can still qualify and get the best rates.
(Note: Options vary from state to state. For example, annuities with long-term care benefits are widely available, but not for New York residents.)
n n n Lynn Lavender, CLTC, is Principal at Guide Insurance and has been handling the insurance needs of individuals and businesses for over 20 years. She can be reached at: 914-478-7640 or LLavender@GuideINS.com
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