Question 1

What are the major parts of a Long-Term Care Insurance Policy?

Accepted Answer

There are more similarities in policies than differences. Let&rsquo;s review the items a majority of long-term care insurance plans include:
Monthly Benefit. This is how much the insurance company will pay toward your care on a monthly basis. If there is an inflation or benefit increase rider this amount will increase over time. There are some companies that only offer daily benefit and some that offer an option of monthly or daily. If you have a choice, insist on a monthly benefit.
The reason is simple. Most claims start with care at home. The way homecare is delivered can impact your insurance benefit if you don&rsquo;t have a monthly benefit.
For this example, let&rsquo;s say the cost of care is as follows:
Home health aide is $20 an hour, RN is $25 an hour, Physical Therapist is $23 an hour
Let&rsquo;s say you receive care at home using today&rsquo;s costs and you have a long-term care policy. Once you satisfy your elimination period, here is the schedule for your care:

Monday
4 hours &ndash; home health aide

Tuesday
4 hours &ndash; home health aide - 2 hours - RN visit &ndash; 2 hours - physical therapy

Wednesday
4 hours &ndash; home health aide

Thursday
4 hours &ndash; home health aide

Friday
4 hours &ndash; home health aide &ndash; 2 hours - RN visit &ndash; 2 hours - physical therapy

Saturday
4 hours &ndash; home health aide

Sunday
4 hours &ndash; home health aide

Monday
$80
$80

Tuesday
$80 + $50 + $46
$176

Wednesday
$80
$80

Thursday
$80
$80

Friday
$80 + $50 + $46
$176

Saturday
$80
$80

Sunday
$80
$80

If your policy has a daily benefit of $100 it would pay Monday, Wednesday, Thursday, Saturday and Sunday in full with no out of pocket expense. However, you would have $76 out of pocket on Tuesday and Friday. That would total $152 for the week or about $608 per month.
However, if you were able to get a monthly benefit instead of a daily benefit, your policy would pay $3000 ($100/day * 30 days) per month. In that scenario, your bills still total $3008 for the month but your out of pocket expense is $8 instead of $608.
Benefit Pool or Benefit Period
This can be confusing. The benefit pool is the initial total benefit the policy will pay. Some insurance companies create the initial pool by using a benefit period. So instead of saying you have $100,000 in your pool, they use the monthly benefit * total number of months in the benefit period = benefit pool total. In either case, with most companies, policyholders are ruled by the pool of money and not a stopwatch for benefits. This is to the consumer&rsquo;s advantage. If you are not using the maximum amount you have available each month, you don&rsquo;t lose the money; it stays in the benefit pool and is still subject to increases if you have an inflation rider. That means, even when you are taking money out of the policy, your benefits could still be growing at the same time.
There are some policies where the benefit period is a stopwatch. In other words, if it says you have a two-year benefit period, that is all you get. Once you start needing care it will expire in that period of time. If the policy you are considering has a benefit period, be sure to ask if it&rsquo;s a benefit pool of money or not. Ideally you want a pool of money product and most policies are constructed that way.
Unlimited benefits are rare but some companies do offer them. Though they can be very costly, &lsquo;unlimited&rsquo; means you could never exhaust your benefits. There are reasons why you may want to consider an unlimited benefit (a large estate to protect, family history of longevity or care, and peace-of-mind). In many situations, though, you can design a plan with sufficient benefits so unlimited may not be necessary. In partnership states, the dollar-for-dollar asset disregard provides additional asset protection based on the amount of benefits paid by the policy. If this is a concern, discuss it with Cassandra Watson.
Benefit Increase Rider/Inflation Benefit
Since most people who purchase long-term care insurance are doing so well before retirement, inflation protection is a key part of a policy. Depending on your age, an inflation rider will be required in partnership states.
There are several ways policies provide benefit increases over time.
Guaranteed Purchase Option or Future Purchase Option (GPO / FPO)
This option gives the policyholder an OPTION to purchase additional benefits, without regard to health, as long as you are not on claim. In these policies, you need to elect to exercise your ability to purchase additional coverage. When you buy-up, your premium will increase based on your attained age. This option is normally not available on a partnership qualified plan. However, there are other policies that only allow you to decline the increases, this means you&rsquo;ve selected a policy where the premium automatically increases over time and it may provide partnership certification. If your plan only gives you the chance to decline the increases, in some states it could be partnership certified. Please note, though, if you ever DECLINE an increase you would lose the partnership certification.
Automatic Increase Based on Specific Percentage
This is the most common method for benefit increases. Companies must offer 5% compounded annually, although this is often much more than what most people require. Some companies offer as low as 1% compounded. The option most commonly chosen is 3% compounded. Some companies also offer 5% simple, or a variable rate based on the CPI, or other methods that change over time based on your age. Cassandra Watson will review these options and make proper recommendations.
EXAMPLE:
50-YEAR-OLD WITH $3500 A MONTH with $150,000 INITIAL POOL with 3% compound INFLATION RIDER (benefit increase option).

50
$150,000
$3,500
67
$247,927
$5,785
84
$409,786
$9,562

51
$154,500
$3,605
68
$255,365
$5,959
85
$422,079
$9,849

52
$159,135
$3,713
69
$263,026
$6,137
86
$434,742
$10,144

53
$163,909
$3,825
70
$270,917
$6,321
87
$447,784
$10,448

54
$168,826
$3,939
71
$279,044
$6,511
88
$461,218
$10,762

55
$173,891
$4,057
72
$287,416
$6,706
89
$475,054
$11,085

56
$179,108
$4,179
73
$296,038
$6,908
90
$489,306
$11,417

57
$184,481
$4,305
74
$403,919
$7,115
91
$503,985
$11,760

58
$190,016
$4,434
75
$314,067
$7,548
92
$519,104
$12,112

59
$195,716
$4,567
76
$323,489
$7,548
93
$534,678
$12,476

60
$201,587
$4,704
77
$333,193
$7,775
94
$550,718 
$12,850

61
$207,635
$4,845
78
$343,189
$8,008
95
$567,239
$13,236

62
$213,864
$4,990
79
$353,485
$8,248
96
$584,257
$13,633

63
$220,289
$5,140
80
$364,089
$8,495
97
$601,784
$14,042

64
$226,888
$5,294
81
$375,012
$8,750
98
$619,838
$14,463

65
$233,695
$5,453
82
$386,262
$9,013
99
$638,433 
$14,897

66
$240,706
$5,616
83
$397,850
$9,283

Elimination Period
The elimination period is just a fancy way to say &lsquo;deductible.&rsquo; Elimination periods for Long-Term Care Insurance are based on DAYS not DOLLARS. It is the period of time you have to wait before you are eligible to receive your monthly/daily benefit in your long-term care policy. The most common elimination period is 90 days.
With most companies, this is a once-in-a-lifetime deductible, not a new elimination period per occurrence. There are two options: calendar day elimination period and service day elimination period. A calendar day elimination period uses cumulative days before the benefits are available. Some companies use service days as opposed to calendar days, which means only days where services are received by the policyholder count to decrease the days in the elimination period.
Some companies also offer riders, which allow for homecare to be paid on day one (Waiver of Home Care Elimination Period). You have to determine if the cost of the rider is worth the benefit. Cassandra Watson will help you make this determination.
Benefit Triggers
These are fairly standardized. Your health care professional must certify you need assistance with at least two of the six Activities of Daily Living or require supervision due to a cognitive impairment. This help must be expected to last at least 90 days.
Activities of Daily Living (ADLs) include bathing, continence, dressing, eating, toileting and transferring.
Shared Care Benefits
This is a popular option many couples choose and many insurers offer in their Long-Term Care policies. This allows a couple the ability to share benefits. In the event one spouse/partner were to spend-down all of his/her own benefit pool, that spouse could use money from the other spouse/partner&rsquo;s benefit pool. If one spouse were to pass away, the premium disappears but 100% of the unused benefit goes to the survivor.
This benefit can work in a number of different ways. Cassandra Watson will explain the differences and which one provides you with the most value.
Case Management
Called by a number of different names, this benefit helps the policyholder and his/her family at the time of claim. This can include: providing care options, recommending plans of care, researching arrangements, and even searching out provider discounts. Not every policy has this benefit and it works a little differently with each company. However, it is very valuable and helps reduce the burden on the family at the time of claim.
There are many other options with Long-Term Care Insurance. Some of these are less important, but Cassandra Watson will explain the options and make the proper recommendations.

Question 2

Are Long-Term Care Partnership Plans Different from Non-Partnership Policies?

Accepted Answer

Partnership policies look and act the same as any other long-term care policies! However, they provide additional asset protection as a reward for people who have planned in advance for the cost of long-term care.
The first four states to adopt partnership policies were California, Indiana, New York and Connecticut, collectively known as the original partnership states.
Today, most states have active partnership plans in place. The federal Deficit Reduction Act of 2005, signed into law by President George W. Bush, gave the states the authority to set up partnership programs to encourage and reward consumers who purchased qualified long-term care insurance by giving them an added layer of asset protection. These partnership certified plans provide the consumer with additional &ldquo;dollar-for-dollar asset protection&rdquo; or what is referred to as &ldquo;asset disregard&rdquo;.
This means that the exact amount of your resources (assets) equal to the dollar amount of long-term care insurance benefits paid to you or on your behalf under the policy may be disregarded for purposes of determining eligibility for long-term care Medicaid benefits. It also protects your estate from any subsequent recovery by the State for receipt of Medicaid-paid services.
Under most circumstances, if you need Medicaid to pay for long-term care services, you must satisfy the income and asset eligibility levels for Medicaid. For many, this means a spend-down of their assets before Medicaid will allow them to apply. With a partnership policy, the amount of assets that may be disregarded is equal to the amount of long-term care benefit paid out of the policy prior to the time you apply for long-term care Medicaid. As a result, you may be able to receive coverage under Medicaid without first being required to substantially exhaust your personal resources. Furthermore, the amount that may be shielded from estate recovery would be equal to the amount of assets disregarded for purposes of eligibility for long-term care Medicaid benefits. These plans require certain inflation benefit features, among other things, in order for your state to certify them. For many people, the extra asset protection is a key ingredient to safeguard assets from the high costs of extended long-term care.

Question 3

Is Long-Term Care Insurance Expensive?

Accepted Answer

No, most of the time long-term care insurance is very affordable. However, it can be more expensive if you are older or have major health issues. In general, long-term care insurance is affordable, and that affordability depends on your age, health and policy design.
The larger the benefit, the bigger the asset protection. But here&rsquo;s something to consider: Even a small policy can provide asset protection, especially in a partnership state. Don&rsquo;t make the mistake of walking away from coverage just because you can&rsquo;t afford a huge policy. A Long-Term Care Insurance Specialist like Cassandra Watson will share with you the appropriate coverage based on your situation and illustrate how a small plan can provide you with your choice of quality caregivers, asset protection, and a reduction in family burden. Remember, many plans include case management. This is a huge resource that, at claim time, can help you and your family find caregivers and make arrangements for your care.
Here are some key variables to cost.

Age
Health
Spousal/Co-Habitation Status
Amount of Monthly or Daily Benefit
Benefit Pool or Benefit Period Amount
Inflation (either a specific guaranteed percentage every year or options to buy extra benefit)
State of Residence
Additional Riders (Shared Care, for example)
Elimination Period
Limited Pay Options

Examples:
Healthy, married, 50-year-old male
$3000 a month, 3-year benefit pool of money, 3% compound inflation with 90-day elimination period. *
Of ten major companies, the premiums run from $60.58 per month to as much as $149.29 per month.
*= benefit levels may vary slightly company to company. Single and female rate is higher. For comparison use only, may vary slightly from state to state. Seek advice from LTC Insurance Specialist for details.
Healthy, married, 45-year-old female
$3000 a month, 3-year benefit pool of money, 3% compound inflation with 90-day elimination period. *
Of ten major companies, the premiums run from $86.47 per month to as much as $289.11 per month
*= benefit levels may vary slightly between company and company. Single rate is higher. For comparison use only, may vary slightly from state to state. Seek advice from LTC Insurance Specialist for details.
This is why a Specialist in long-term care like Cassandra Watson and Next-Gen LTC Planning represent all the major companies will help you find the best coverage at the best value based on your age, health, and needs.

Question 4

I've read articles about rate increases. Can my premiums go up?

Accepted Answer

What you read is not always the full story. Most long-term care insurance policies are intended to have level premiums. There are some policies where the premium does go up each year, by design, as benefits increase or you elect to increase benefits. However, most policies have premiums which are intended to remain level based on your age at the time of application, your health, and the amount of coverage you selected. Since most people will select some kind of inflation protection, the premium is intended to remain level while the benefits increase&mdash;the cost of the inflation benefit is already factored into the premium. As you read articles about premiums increasing, be aware that there are plans that intentionally go up over time.

Question 5

Do I have to report benefits from a Long-Term Care Insurance policy to the IRS?

Accepted Answer

Generally, no. Tax-qualified Long-Term Care Insurance benefits come to you tax-free. Insurance companies that pay long-term care insurance benefits are required by the Internal Revenue Service (IRS) to provide claimants with a 1099 LTC. This form is used to report the payments made under a long-term care insurance contract. Insurance companies usually issue these 1099 LTC Forms in January for the prior tax year.
The Form 1099-LTC reflects payments made directly to you as well as those payments made to third parties on your behalf. Some people are concerned when they receive these IRS forms in the mail, since the amounts reported to you and the IRS can be very high (as little as $20,000, $100,000, or more). It causes policyholders to wonder about the tax implications of their LTC benefit, however the 1099 forms are required simply to show the IRS you received tax-free benefits from your long-term care insurance policy. It does not necessarily mean that the amount is taxable income to you.
If You Prepare Your Own Tax Forms
Request the Instructions for Form 1099-LTC from the IRS. You can request free tax forms and guides by calling the IRS at 1-800-TAX-Form or 1-800-829-3676.
The form looks something like this:

Be sure to speak with your tax advisor. Below is a simple reference of the meaning of numbers reported in each box on the 1099 LTC.
Box 1. Gross benefits paid by the insurance company.
Box 2. Does not apply to long-term care insurance.
Box 3. This indicates benefits paid (as reflected in Box 1) as either on a Per Diem (Indemnity) basis or as a Reimbursement for actual long-term care expenses incurred.
Box 4: This is an optional field that indicates if benefits were paid from a Tax Qualified long-term care insurance contract.
Box 5: The Chronically Ill box will always be checked for LTC. The Terminally Ill box is not applicable to long-term care
PAYER'S NAME: The name of the insurance company and its address.
OMB No.: The tax year for which amounts are reported.
PAYER'S FEDERAL IDENTIFICATION NUMBER: The federal tax identification number for the insurance company that paid the benefit amounts.
POLICYHOLDER'S IDENTIFICATION: The policyholder's identification number, which should be the same as what is in box 10, the insured's Social Security number.
INSURED'S SOCIAL SECURITY: The Social Security number, name and address for the insured who was the recipient of benefits.
Account Number: The actual claim number. This box may also contain the Total Number of Days paid if the policy is an Indemnity (per diem paid) policy.
Date Certified: If the policy uses a Reimbursement formula, this box will show the date certified as Chronically Ill. If the policy uses a Per Diem (indemnity) formula, it will show the claim's original date of loss.
Additional Explanations Regarding Box 3
1. If Box 3 is marked "Reimbursed Amount" and the policy is categorized as a Tax-Qualified Contract, then the amount of money received can generally be excluded from the income being reported. The insurance company can tell you if your policy is considered a Tax-Qualified policy.
A tax-qualified long term care insurance contract qualifies for favorable federal income tax treatment. If the policy only pays benefits that reimburse you for qualified long-term care expenses you will not owe federal income tax on these benefits.
2. If Box 3 is marked "Reimbursed Amount" and you have a Non-Tax Qualified Contract, then some or all of your benefits may be taxable. Again, the insurance company can tell you if your policy is considered a Non-Tax Qualified policy.
A Non-Tax Qualified policy may result in a tax liability. You should consult a tax-advisor. Today, most long-term care policies are tax-qualified.
3. If Box 3 is marked "Per Diem" (which will happen for policies that are considered Indemnity policies) then the amount you may exclude from taxable income being reported is limited.
Because benefits were paid on a per diem (indemnity) basis, without regard to the actual long-term care expenses incurred; the amount of benefits that may be excluded from income is subject to a daily maximum amount.
If this per diem (indemnity) limitation is exceeded, part of the benefits received may be taxable. The amount of the limitation increases every year. If you have that type of policy be sure to consult with your tax advisor.

Question 6

Are all Long-Term Care Insurance Policies the Same?

Accepted Answer

The answer is no. While policies typically share core benefits, they are not all the same. Most insurance agents and financial advisors know very little about designing a policy because the industry and the product features evolve rapidly. Often, they will design a plan which costs much more than what you really need to spend, because they&rsquo;re not as familiar with how plans are being used at the time of claim.
First, insurance premiums are regulated so no one individual insurance agent can &ldquo;give you a deal&rdquo;. You can have three agents quote the same company and, if they are quoting the same benefit, the premium will be the same. Any premium differences will be due to underwriting class (preferred, select, standard, substandard), gender, spousal or partner discounts, the amount of benefit, and &ldquo;riders&rdquo; that are added to the policy.
With experience and dedication few other have, Cassandra Watson will ask you many questions about your health and future or current retirement plans. This is to help you determine the amount of benefit you would need to meet your concerns and budget goals. Then, she will shop for the best coverage at the best value. Some insurance agents can only market policies from one insurance company, top Long-Term Care Specialists can usually compare rates from five, six insurers or more. Cassandra Watson and Next-Gen LTC Planning represents all the major companies in the industry.
Unlike other forms of insurance where you may benefit from changing insurers from one year to another, generally you buy long-term care insurance only once. This is because premiums are based on the AGE and HEALTH you are at the time of your application&mdash;so it rarely pays to switch companies. That's why it's important to ask your insurance professional if they can compare coverage from different insurers from the start.
Important riders to consider, and which certainly affect your premium, include inflation options and shared benefit options for spouses/partners.
Many states have partnership plans which provide additional dollar-for-dollar asset protection or &ldquo;asset disregard&rdquo;. Specific states have different requirements for inflation options for a policy to be considered a partnership plan. 
Short-Term plans have smaller benefits but generally have less conservative underwriting requirements. They will also consider new applicants at older ages.
Single premium asset based or so-called &ldquo;hybrid&rdquo; policies (life insurance with riders for long-term care) may have the same premium but the benefit levels will differ. Underwriting will also differ from company to company. Some companies offer annuity based policies with riders for long-term care as well. These generally will have less conservative underwriting.

Frequently Asked Questions

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