Do Long Term Care Insurance Policies Have Tax Advantages?

Looking at the very high cost of care nowadays, you have to admit that there is no other product that is as reliable as a long term care insurance policy. Apart from long term care (LTC) coverage and asset protection, the tax advantages of long term care insurance (LTCI) should be looked into. Of course, before the tax benefits that you can enjoy you have to study fist the policy which you intend to buy. It has to naturally match the cost of care in your area otherwise your hard earned money could go to waste as you may never get to use the policy. When studying a potential LTCI policy you have to give equal attention to the amount of your maximum daily benefit and the benefit triggers. So many stories have been told of unpaid claims and it’s usually the insurance company that lands in hot water when in fact, it’s the policyholder who had failed to read and understand the fine print of her LTCI policy. That fine print usually contains provisions on one’s health that will qualify him or her for LTC. For example, a specific LTCI stipulates that the insured will qualify for LTC once she can no longer perform two or more of the six activities of daily living (ADL) without assistance. These ADLs would be eating, bathing, dressing, toileting, continence, and transferring. So, when the insured woke up one morning and realized that she has completely lost her ability to hear she rushed to her insurer to make a claim. Unfortunately, the insurer told her that she does not qualify for her policy’s benefits because deafness does not fall under the list of her benefit triggers. It has to be understood that most LTCI policies concentrate on the ability or capacity of a person to live as normal as possible. In the sample scenario above, deafness did not hinder the insured individual from performing the basic ADLs and thus she does not need LTC. Tax Advantages of Long Term Care Insurance Before an insured individual can be eligible for his policy’s benefits, he should require 90 days of assistance in at least two ADLs resulting from physical disability, chronic illness, or cognitive impairment. This must be certified by a licensed caregiver or nurse. Once the insured has qualified for his insurance benefits these will start rolling once he has satisfied the elimination period stated on his policy. This is the length of time that he will be paying for all of his expenses on care from out-of-pocket. This is the reason LTCI is not encouraged to everybody. You will need a strong nest egg to satisfy the waiting period of your policy because if you fail you will not qualify you for your benefits. Despite being expensive LTCI offers federal tax advantages. Tax qualified policies entitle the policyholders to deduct a portion of their annual premiums, which is considered as medical expenses, from their income tax. One’s age at the end of the taxable year will determine the amount of his premium that shall be considered deductible. To learn more about the tax advantages of long term care insurance contact a licensed LTCI representative in your area.