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Long-Term Care Insurance Offers More Choices

A 2016 study by the American Association for Long Term Care Insurance found that more than half of new claims under these policies are for home care – not nursing home care (less than a third) or assisted living care (14 percent) as many consumers believe. While nursing home care definitely ranks at the high end of the long-term care cost spectrum, long-term care insurance (LTCI) may also help cover the cost of in-home services from nurses’ aides, home health aides and therapists or services in an assisted living facility.

LTCI may alleviate the potential burden of someone becoming the primary caregiver for another in the event of chronic illness or disability. If you have hereditary conditions that may be passed on to your children, purchasing LTCI for them when they turn 18 may help prevent them from being ineligible for coverage later in their lives.

Premiums paid for LTCI policies can be deducted as medical expenses only to the amount by which your total medical expenses exceed 10 percent of your AGI. The policy must: 1) be guaranteed renewable, 2) not provide for a cash surrender value or other money that can be paid or borrowed, 3) provide that refunds, other than on insured’s death or cancellation of the contract, and dividends be used only to reduce future premiums or increase future benefits, and 4) generally not pay or reimburse expenses that would be reimbursed under Medicare.

The amount of qualified long-term care premiums you can include is limited. You can include the following amounts as medical expenses on Schedule A (Form 1040), according to the IRS:


Taxpayer’s Age at Year End

2019 Deductible Amount

Age 40 or younger

$420

Age 41 to 50

$790

Age 51 to 60

$1,580

Age 61 to 70

$4,220

Age 71 or over

$5,270


Health care costs, including long-term care services provided in the home or in an assisted or skilled facility, can greatly impact your retirement finances. A 2017 study from the Center for Retirement Research at Boston College found that more than half of working-age Americans are at risk for a lower standard of living in retirement. Those rates would be even higher if they took healthcare and long-term care into account, the center said.

As with every product, long-term care insurance has its pros and cons, but a large number of Americans haven’t even considered this product as part of their overall retirement planning. One of the biggest complaints against some long-term care policies has been their price tag. While most policies can potentially save their holders a great deal in medical costs, they can still be expensive. 

Some people are simply confused about what the insurance is and how you can purchase it. So in an attempt to clear up some of the confusion, companies are beginning to simplify their policies and the process to buy the insurance. Companies are also teaming with more employers to add long-term care coverage to the list of employee benefits. This is similar to the way that group life insurance has become a staple of many companies’ benefits plan. 

One final criticism comes from people who purchase long-term care policies and end up never needing them. While this is an obvious risk you take when purchasing any insurance, companies are now working to increase the benefit of having the insurance. Long-term care policies are also becoming more flexible and more able to tailor policies to an individual’s needs and are working to become more of an investment option. In some cases, they may even combine an annuity feature. 

With all of the improvements and added features of long-term care policies, more Americans may begin to take another look at this product. And while long-term care insurance isn’t for everyone, it may be a great addition to your retirement plan. You should always work with a financial professional before purchasing the insurance. Long-term care insurance may be worth considering as the cost of medical care doesn’t seem to be slowing down any time soon. For more information contact our risk management specialist, Heidi Heineke-Magri.