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Life and Health


By September 1, 2009No Comments

If you’ve decided to purchase Long-Term Care insurance (LTCI), good for you. There’s no question that LTCI can help protect your family’s finances by covering the exorbitant costs of long-term care if and when necessary.

However, because LTCI is such an important and sometimes costly purchase, it’s vital that you do your research and buy a policy for the right reasons. Too many insurance companies persuade consumers to buy LTCI with exaggerated claims and “facts.”

When purchasing an LTCI policy, keep your eye out for these top five sales pitches:

  1. An LTCI policy is a valuable tax write-off. This might be true in some cases, particularly for business owners, but this statement is a myth for many LTCI policy owners. Although premiums paid for a tax-qualified LTCI policy ultimately can reduce your tax bill, you have to itemize deductions to qualify.
    Additionally, for tax write-off purposes, LTCI premiums fall into the medical and dental expenses categories. This category is limited to expenses that surpass 7.5% of your income. So, if you’re income is $75,000, you’ll need more than $5,625 in unreimbursed health and dental care expenses before you can even add in your LTCI premiums.
    Plus, even if your LTCI premiums go above 7.5% of your income, you can’t include all of the payments in your medical and dental expenses deduction. Your premiums are deductible according to a sliding scale based on your age.
  2. All assisted-living facilities are created equal. Under current law, there is no national standard definition for “long-term care facility.” Therefore, if your LTCI policy says it covers a stay in an “assisted-living facility” or “adult day-care facility,” this could mean something different depending on the particular policy and the state where the policy was created.
    Therefore, if you purchase an LTCI policy and then move to another state, there’s a possibility that there are no facilities in your new state that match the definitions of your policy. Obviously, this could put you and your family in a serious bind if you ever require long-term care. Before you sign on the dotted line, ask plenty of questions and make sure you fully understand what type of facilities the policy covers.
  3. Buy now to lock in the price. When purchasing an LTCI policy, many consumers are under the false impression that their premiums will be the same forever. Although your premiums typically depend on your age at the time you purchase the policy, this does not mean the premiums will stay the same for the life of the policy. Your premiums can go up any time your insurance company enacts a rate increase, as long as the increase is approved by the state insurance commissioner.
    Additionally, LTCI is particularly vulnerable to rate increases because it’s relatively new to the insurance world. Insurance companies don’t have a sufficient amount of data to predict the number of long-term care claims they will face in coming years.
  4. You should replace your current LTCI policy with a newer one. Although some LTCI policies might have an added benefit that your current policy doesn’t include, it might not be a wise move to switch policies mid-game. First of all, your premiums are based on your age at the time you purchase the LTCI policy. Therefore, if you switch to a new policy, your premiums could increase. On top of that, you might have developed a pre-existing condition since you purchased the first policy, and this might not be covered by the new policy.
    If you want to add benefits to your policy, you’re probably better off to upgrade your current policy instead of buying a new one.
  5. An insurance company’s financial rating isn’t important. Before you buy an LTCI policy, check the company’s financial rating with Standard & Poor’s, Moody’s, A.M. Best, Fitch or Weiss — these are all reputable financial rating services. You might also want to contact your state’s insurance department for additional details on specific companies.
    Consult with one of our LTCI specialists to review these and other areas of this valuable coverage. We want to make sure that you’re getting the most for your LTCI premium.