Qualifying for long term care insurance benefits under a long term care policy is based upon
your inability to perform certain Activities of Daily Living or becoming cognitively
impaired as the result of dementia or Alzheimer's disease. Activities of Daily Living
(ADL's) include:
: Ability to wash one's body by bathing
in a shower or a bathtub and get in and out of the tub
: Ability to control and check bowel
and urination and wash there after
Ability to put on and
take off clothes, braces or items like artificial limbs
Ability to take in food
Ability to get in and
out of toilet and do necessary washing
Ability to move
and change positions from sitting to standing etc
Exactly how this is defined varies from policy to policy but is generally defined
as the inability to perform without assistance two or more ADL's due to sickness
or injury or because you need substantial supervision due to an dementia or Alzheimer's
disease.
There are differences in how you qualify for benefits under tax-qualified and non-tax-qualified
plans . In general, it may be more difficult to qualify for benefits under a tax
qualified than a non-tax-qualified plan. Some key differences include:
– Tax qualified plans must
cover those who are “chronically ill” and cannot without “substantial assistance”
perform at least 2 Activities of Daily living for a period expected to last at least
90 days. Non-tax qualified plans may allow benefits when “medically necessary”,
providing greater discretion on the part of the policy holder's physician.
- Tax qualified
plans must include at least 5 activities of daily living. Non-tax qualified plans
may include more activities of daily living, making it easier to meet the two activity
standard. Further, tax-qualified plans refer to the inability without “substantial
assistance” whereas non-tax qualified plan require a lower level of “regular human
assistance or supervision”.
- Cognitive impairment
is defined as “severe” in a tax-qualified plan and not in its non-tax qualified
counterpart.
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Most long term care insurance plans provide some form of the following benefits:
Pay for services
of a professional care coordinator, generally a registered nurse or a licensed social
worker, that provides information, advice, and arranging of long term care services.
: Pays for medically
necessary modifications to the home, like wheelchair ramps installation of grab
bars and hand rails and bath or shower modifications Enables renovations and adaptations
of the home setup for better living;
Pays for training
informal caregivers in the proper procedures for caring for the policyholder while
at the policyholder's home.
Premiums are
waived once the policyholder qualifies for benefits under the policy and the elimination
period has been satisfied.
Pays
for room and board charges in a nursing facility on a temporary basis while the
policyholder is absent, for example, because they are receiving care in a hospital.
If the
policyholder qualifies for benefits under the policy and then stops receiving care
before the maximum benefits are exhausted and then does not require qualify again
for benefit for a certain period, then the maximum benefit amount is restored to
its original amount.
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Most long term care plans offer a variety of optional benefits. These may include:
: See discussion above.
Premiums on a joint policy
is suspended as soon as any one of the couple enters a claim period.
When both spouses
are covered and one qualifies for a waiver of premium because they are receiving
care the premiums for the spouse not receiving care is also waived.
Provides for coverage
to remain in force as paid up coverage if you stop paying premiums and lapse your
policy. Coverage remains in force but at a reduced benefit amount.
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Premiums can be paid on a monthly, quarterly or annual basis. Most policies
are paid on a lifetime basis, meaning the premiums continue for a long as the policyholder
owns the policy. Some companies now offer what are referred to as 10-pay or limited
pay products. Under these plans, you pay premiums for a certain period of time,
generally 10 years, after which the policy is paid in full for the remainder of
your life.
Premiums may not be increased for you individually once you have purchased
your policy because of changes in your age or health. However, carriers may, with
the approval of the state insurance commissioner, increase rates for a class of
policyholders. A class of policy holders generally refers to a group of policyholders
who purchased the same plan and where in the same age group at the time of purchase.
You can choose to cancel your policy or the carrier will cancel your policy
if you fail to pay the premiums when they are due. However, the carrier my not cancel
your policy because of changes in your age or health.
Premiums for federally tax qualified plans are tax deductible, subject to
certain limitations, and benefits paid under federally tax qualified plans are not
taxable when received. Premiums for federally tax qualified plans are tax deductible
along with other non-reimbursed medical expenses to the extent they exceed 7.5%
of adjusted gross income, subject to the following limitations based upon age:
|
Age
|
Maximum Tax Dedictable Premium
|
|
Under 41
|
$260
|
|
41-50
|
$490
|
|
51-60
|
$980
|
|
61-70
|
$2,600
|
|
Over 70
|
$3,250
|
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