• Long Term Care Insurance
  • Selecting a Plan
  • Tax Qualified vs. Non-Tax Qualified Plans
  • What does it cost?
  • California Partnership for Long Term Care

Long Term Care Insurance
     Long term care insurance is one of the best ways to protect you and your family from the expenses incurred as a result of the need for continued care in the future. It can protect your assets and financial stability and give you independence and freedom of choice. Your individual long term care insurance plan must be tailored to your individual needs in consideration of your estate and lifestyle. There are several options and benefits to consider in determining which plan is best for you.

Selecting a Plan
     There are two basic types of long term care insurance options: “Facility Only” plans and “Comprehensive” plans. “Facility Only” plans cover your care in a residential or assisted living facility or nursing home, but not in your home. “Comprehensive” plans combine facility only coverage with coverage for care in your home and other community care facilities such as adult day care centers.

     The long term care benefits you receive depend on the plan you select (Facility Only or Comprehensive). Additional important factors you will need to consider are:

  • Benefit amount – the dollar amount the policy pays each day or month.
  • Benefit period – the length of time you will receive benefits.
  • Elimination period – the period of time you have to wait before the policy begins paying for your care.
  • Tax Qualified vs. Non-Tax Qualified plan – see below for a comparison of these plans.
  • Inflation protection rider (optional benefit) – this rider automatically increases your benefit amount each year. Simple inflation protection increases your benefit amount each year by 5% of the original benefit amount. Compound inflation protection increases your benefit amount each year by 5% of the previous year’s benefit amount.
Tax Qualified vs. Non-Tax Qualified Plans
TAX QUALIFIED. Congress passed legislation effective in 1997 giving a tax break to people who purchase long term care insurance that meets certain federal standards. These tax-qualified plans use a stricter eligibility standard than standards established in California for long term care insurance plans (non-tax qualified plans). Policies that are labeled as “Federally Tax Qualified” use federal standards for paying benefits (i.e. you must be unable to perform 2 of the following 6 ADLs without substantial assistance from another person for at least 90 days: bathing, dressing, continence, toileting, transferring, eating or when you need help because of severe cognitive impairment). Some or all of the premiums for tax-qualified plans may be tax deductible as a medical expense. Benefits received from a tax-qualified plan are not taxable as income.

NON-TAX QUALIFIED. Policies that use standards established in California are referred to as non-tax qualified plans. Eligibility standards to pay benefits require you be impaired in 2 out of 7 ADLs (the same 6 ADLs as listed for the tax-qualified plan plus ambulating or when you need help because of cognitive impairment). You also don’t require the certification that you will need care for at least 90 days. The premiums for these plans are not tax deductible. Benefits paid from the non-tax qualified plans have not been taxed as income, however it is not clear under federal law if the benefit payments are taxable as income.

What does it cost?
     The cost of long term care insurance policies varies according to the type of policy you select (Facility Only plan or Comprehensive plan) and the coverage you select. The premium is calculated based on a number of factors that include the type of policy you select, your age and health when you apply, the waiting period before the benefits begin, the benefit amount you select, the length of time the benefit will be paid, and whether you choose a tax qualified or non-tax qualified plan.

California Partnership for Long Term Care
     California Partnership long term care insurance policies differ from traditional long term care insurance policies in that they offer a unique asset protection feature. Each dollar your Partnership policy pays in benefits can protect one dollar of your assets should you ever need to apply for Medi-Cal for health or long term care benefits. In the absence of this protection, a person can only retain $2,000 in assets in order to qualify for Medi-Cal benefits. Should a person with a Partnership long term care insurance policy exhaust their policy benefits, they won’t have to spend down their assets to the poverty level before they can receive Medi-Cal benefits.

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