900 N. Kings Highway, Cherry Hill, New Jersey 08034
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Fax: 856.667.3652
The Online Advisor - October 1999
Long-term care insurance: Do you need it?
It has been estimated that nearly half of all people over age 65 will require nursing home care at some point in their lives. The cost of an extended stay in a nursing home could completely deplete savings that it took a lifetime to accumulate. Therefore, long-term care insurance should be considered when planning for the future. Do you need it? Are the premiums deductible on your tax return? What should be included in the policy?
Factors to consider
A number of factors should be considered in determining whether you need long-term care insurance.
* Age. One consideration is age. Statistically, the likelihood of becoming chronically ill before the age of 65 is remote. Therefore, buying too soon may be overly cautious. Waiting too long, however, could mean a dramatic increase in cost.
* Wealth. The amount of your wealth is another factor. People with low incomes usually can't afford the premiums. On the other hand, wealthy individuals can often self-insure. Consequently, it is the middle class that generally benefits most from this type of insurance.
* Family history. Consider family history to determine whether nursing home care is likely to be needed.
* Tax treatment. Since 1997, premiums for long-term care insurance have been deductible. However, there are extensive limitations. The first limitation is the 7-1/2 percent of adjusted gross income (AGI) floor. For example, if your AGI is $100,000, you will receive a tax benefit only if your deductible medical costs, including long-term care premiums, exceed $7,500. Also, the deductible amount of the premiums varies with your age. For 1999, if the insured is 40 or under, the annual limit is $210. This increases gradually, until the limit on deductible premiums reaches $2,660 for insureds age 71 and over.
* Coverage. Another issue is coverage. Policies come with many different features and options, including the type of services covered, amount of daily benefits, length of benefits, time period before benefits begin, and inflation adjustments. Deciding which features are most important to you will help make the policy fit your needs and budget.
Concerns about price, tax benefits, and coverage make the decision regarding long-term care insurance a difficult one. We encourage you to contact us for additional information and assistance.