Don't Overlook Your Client's Long-Term Care Insurance Needs

By Kahn, Alan D | The CPA Journal, March 1997 | Go to article overview

Don't Overlook Your Client's Long-Term Care Insurance Needs


Kahn, Alan D, The CPA Journal


Whenever you perform an estate and retirement planning review, don't forget to include a review and evaluation of long-term care insurance. It is estimated that nearly half of all people over age 65 will spend some time in a nursing home. It is essential in any planning scenario to consider how to protect lifetime savings from the unexpected cost of in-home care or a nursing home stay due to an extended illness.

One of the ways to meet the rising costs of long-term care while protecting assets is the purchase of a long-term care policy.

The following items should be considered when giving consideration to the purchase of long-term care insurance:

Coverage. The type of coverage depends on personal preferences. For example, is it preferable that the care be given at home or in a nursing home? Very often care begins at home but eventually leads to a nursing home setting for more intensive care.

Recognizing this very natural progression, a long-term care policy should offer the widest possible options, which include both home care and nursing home coverage. The amount of years selected for these benefits along with elimination periods should also be carefully reviewed.

The choice of an indemnity program, where benefits are paid automatically, or a reimbursement plan should be considered based upon which payout scheme makes the most sense over the long term.

Personal preference to be cared for at home by a loved one or friend, or by certified aides should also be considered when selecting a particular policy.

Costs. The earlier this type of coverage is factored into the financial plan, the lower the annual premium will be. In addition, the cost of long-term care policies vary depending on the type of coverage you select.

One way to reduce your annual premium is to choose a longer elimination period-the elapsed time before benefits are paid. For example, elimination periods often run from 20 up to 100 days. In general, the longer the period, the lower the premium.

Policies are also available in daily benefit amounts from $50 to $250 per day with policy maximum benefit periods of 3, 5, or 6 years or with an unlimited benefit period depending upon individual preferences and the expected size of estate. The longer the benefit period selected, obviously, the higher the premium.

Cost of living and inflation riders should also be considered based upon affordability and age of applicant.

Tax Advantages Under 1996 Tax Act

The recent passage of the Health Insurance Portability and Accountability Act of 1996 greatly enhanced the public's awareness of the need for long-term care. …

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