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Take Charge of Your Future

Do You Have the Right Insurance?

Advice to help you determine whether a long-term care policy makes sense for you.

In general, with a Partnership Program, you'd be able to keep one dollar of assets for each dollar paid by the policy—as long as you meet all the other eligibility requirements for Medicaid, including having a limited income.

Policies that qualify for a Partnership Program must meet specific standards, which vary from state to state. Be sure to ask your insurance agent whether the policy you're considering qualifies under the Partnership Program, how it works with Medicaid, and when and how you would qualify for Medicaid. If you don't get clear answers, or if you have more questions about Medicaid and the Partnership Program in your state, check with your State Health Insurance Assistance Program (SHIP).

Most policies sold today are "tax-qualified" by federal standards. This means you can—under certain conditions—deduct the value of the premiums from your federal income taxes as an itemized medical expense. Of course, this is assuming that you itemize deductions and have medical costs in excess of 7.5 percent of your adjusted gross income.

The amount of the federal deduction depends on your age. Also note that benefits paid out through the policy generally are not taxed as income. Many states also offer limited tax deductions or credits.

How Much Does Long-Term Care Insurance Cost?

Insurers determine the cost of long-term care insurance by the type of coverage you buy, the age at which you buy it, and your health status. The older you are when you buy, the higher your monthly premium is.

For example, in 2008, the average annual premium for a 40-year-old policyholder was $2,050. A 50-year-old paid $2,306—just a couple of hundred dollars more. But the cost increased to $3,109 for a person age 60, and a 70-year-old policyholder paid $6,007.

Picking the Right Policy for Yourself

Unlike Medigap policies—private insurance purchased to supplement Medicare—long-term care insurance does not have standardized options. Different policies offer many different coverage options. Since you don’t know today what your future long-term care needs will be, you may want to buy a policy with flexible options. But before you buy, make sure you approach more than one company, understand all aspects of the policy, and get answers in writing. Here are some important questions to ask:

What services are covered?

Review the types of services covered by the policy you're considering. Find out where you can receive those services, and who is authorized to provide them. Policies may cover the following care arrangements:

Nursing home: A facility with a level of service that provides a full range of skilled health care, rehabilitation care, personal care, and daily activities in a 24/7 setting. Find out if the policy covers more than room and board.

Assisted living: A residence with apartment-style units that makes personal care and other services—such as meal delivery—available and tailors them to meet individual needs.

Adult day services: A program outside the home that provides health, social, and other support services in a supervised setting for adults who need some degree of help during the day.

Home care: A program that can include many services, such as bathing, grooming, and help with chores and housework.

Home modification: Adaptations, such as installing ramps or grab bars to make your home safer and more accessible.

Care coordination: Services provided by a trained or licensed professional who assists with determining needs, locating services, and arranging for care. The policy may also cover monitoring of care providers.

Future service options: If a new type of long-term care service is developed between the time you purchase insurance and the time you need care, some policies have the flexibility to cover the new services—even if the policy doesn't specifically cover them. The "future service" option may be available—on approval of the insurer—if the policy contains specific language about alternative options.

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