On the surface, it can be easy to confuse Long Term Disability (LTD) with Long-Term Care (LTC), perhaps because they both offer coverage for health-related disabilities. However, LTD offers strictly a financial benefit. Once the policy owner qualifies for benefits due to a debilitating illness or accident, the policy pays out a portion of her current income.
Long-Term Care Insurance (LTCI), on the other hand, pays out benefits to help cover the cost of caregiving services when the policy owner meets certain criteria. Specifically, when he can no longer engage in some or all of the activities of daily living: bathing, dressing, feeding oneself, using the bathroom, caring for one’s personal hygiene, and walking or moving from one position to another.[1] LTCI coverage may span any number of caregiving services, ranging from skilled nursing home and assisted living facility to adult day care and in-home assistance.
However, the two types of insurance policies are similar in how premiums are determined. Premiums are based on the policy owner’s age, health, the benefit amount and the policy waiting period; the longer the wait, the lower the premium. One key difference is that LTD may be a good purchase at any time throughout one’s career, since a disabling accident or illness could occur at any time. In contrast, LTCI is usually purchased mid- to late-career as people begin to plan for retirement.[2]
Long-term care continues to be a challenging issue in the U.S. It appears the second wave of baby boomers is even more determined to “age at home,” while at the same time, they are more likely to suffer from multiple chronic conditions, such as heart disease and diabetes.[1] This confluence of factors makes it all the more difficult to come up with solutions for long-term care.
To complicate matters, insurers that offer long-term care (LTC) insurance have become more particular about offering coverage. According to the American Association for Long-Term Care Insurance, more people are being denied coverage across the spectrum of age brackets. The following shows the percentage of applicants declined coverage in 2017:[2]
• Below age 50: 20%
• 50- to 59-year-olds: 22%
• 60- to 69-year-olds: 30%
• 70- to 79-year-olds: 44%
Not only have sales of traditional LTC policies decreased over the last 17 years (currently one-tenth of the sales in 2000), but there are now far fewer insurers in the marketplace.[3]
Although we often spend a lot of time on planning for retirement, we don’t always devote substantial time and resources to how to pay for potential long-term care expenses. We should. Like it or not, long-term care is expensive and likely to take up a large portion of our household budgets later in life. Some insurance products such as life insurance and annuities provide various options you may want to consider. We’d be happy to discuss your options based on your unique situation.
People are living longer but continue to develop health conditions that require caregiving as they age. As a result, LTC premiums continue to rise. However, traditional LTC premiums are considered a medical expense. For an individual who itemizes tax deductions, medical expenses can be deductible if certain qualifications are met. The amount of LTC insurance premiums that can be treated as a medical expense is subject to limitations based on the insured’s age.[4]
Also consider activating a chronic illness or long-term care rider that may be attached to your term life or permanent life insurance policy, as these riders can assist with the costs of long-term care should the need arise. Note that the ability to use this option is subject to specific contract terms. Also, benefits are generally treated as accelerated death benefits, which will reduce the overall death benefit of your life insurance policy.
Pets have LTC needs, too
One of the greatest comforts for seniors who find themselves more and more homebound is the company of a pet. As such, it’s important to consider the long-term care needs of your pets as they grow older as well. Dogs are considered geriatric at age 10, but a vet may start talking about senior care around age seven, particularly for large-breed dogs. These changes may involve nutrition, dental care and exercise needs and even running lab work to check for potential age-related problems.[5]
While outdoor cats are subject to environmental hazards that cannot be controlled by a vet, indoor cats generally have longer lifespans. Felines are considered to be entering old age at about 9 years old, with the average lifespan from 12 to 18 years. In fact, trends in veterinary medicine are attributed to longer lifespans in cats these days.[6]
Unfortunately, the older we get, the more difficult it is to get to regular checkups for ourselves, let alone our pets. One vet facility in the Tampa Bay-area of Florida offers a mobile clinic that brings veterinarian services to pet-owning seniors, whether living at home or in an assisted living facility.[7]
Also, remember to keep your pets in mind when you write or update your will. It’s important to have conversations with family and friends to help ensure that your pets will have a loving home should you pass away before them.
Content prepared by Kara Stefan Communications.
Neither our firm nor its agents or representatives may give tax advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions.
We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.
The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.
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