Long term care Insurance is a product sold by insurance companies that helps to provide for the costs of long-term care. This is a type of insurance that is intended to cover costs that are generally not covered by health insurance of Medicare.
Long term care insurance is not necessarily intended for the sick, but rather, it is designed for individuals who may need assistance with activities of daily living, such as bathing or eating. Because of this, the insurance is not restricted based on age, but is available to anyone who may suffer some type of infirmity that may require assistance. Long-term care insurance can cover home care, assisted living, respite care, hospice care, and nursing home facilities.
Types of Long Term Care Insurance
These are two different types of policies, based on classification by income tax law.
The first is the tax-qualified policy. This policy requires that an individual requires care for a minimum of 90 days, and be unable to perform an activity of daily living without assistance, or suffers a severe cognitive impairment. This requires a doctor to provide a plan of care. The tax qualified policy benefits are non-taxable.
The second is the non-tax qualified, or “traditional” policy. These types of policies often require a triggering event, referred to as a medical necessity. What this means is that, when something triggers, and the patient’s doctor repots that the patient needs care for any medical reason, the policy will pay. Individuals who receive benefits under a non-tax qualified policy may risk facing a tax liability received.
Benefits of Long term Care Insurance
As the population ages, many individuals find themselves incapable of caring for themselves as they once did. Long-term care insurance assists in covering out of pocket cots. Without the insurance, the cost of long-term care could prove to be prohibitive.
Additionally, premiums paid for long-term care may be eligible for an income tax deduction, depending on the age of the individual covered. The benefits paid out under a long-term care insurance plan may also be excluded from taxable income.