Backers of long-term-care (LTC) insurance hope that its time has finally come. A new federal law, effective this year, promotes it in four major ways.
But whether this federal backing will impel you to buy depends on your income and circumstances. Here's what's new this year:
1. Employers can now offer group long-term-care policies and tax-deduct any contributions they make to premiums.
Employers might give you access to LTC coverage that you buy yourself. Typically, you'll pay less than if you bought independently. Your premium will be based on your age but not on your state of health.
At larger companies, you may not even have to fill in a health questionnaire. At smaller firms, questionnaires are usually required; employees are charged an average price based on their collective health.
But check what happens when you leave the company. You want to be sure that you can take the policy with you, at no increase in price.
If your employer switches to a new insurer, stay with the old one if you can. That way, your premium won't go up. If you switch to the new insurance company, your premium will probably rise, because you're older than you were when you took the previous policy out.
Employee plans might offer LTC coverage to your spouse and even your parents. They'll have to fill in a health questionnaire, says David Martin, a specialist in group long-term-care coverage for the Boston-based insurance company, John Hancock.
2. Whether you buy employee coverage or an individual LTC policy, part of your premiums qualify as a deductible medical expense.
The size of your write-off depends on your age. At 40, you can deduct $200. At 70, you get $2,000. These write-offs will rise every year to reflect increases in health-care costs.
To make use of this tax break, you have to itemize deductions. Only 29 percent of us do, according to the Internal Revenue Service.
You will also need high medical expenses. Qualified expenses can't be deducted unless they exceed 7.5 percent of your adjusted gross income. Retired people might find it easier to meet this test than working people, Guy Bertsch, a risk manager at UNUM Life Insurance Co. of America in Portland, Maine, told my associate Kate O'Brien Ahlers.
3. If your LTC policy reimburses you for your actual expenses, you get the benefits tax-free. If you're paid a flat per diem rate, regardless of the size of your actual expenses, the benefits are tax-free up to $175 a day. That cap will be indexed to health-cost inflation.
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