Facts

• Since 1998, the Long Term Care Insurance National Advisory Center has raised consumer awareness and provided valuable information about long-term health care insurance. The following statistics trace the history of long-term health care. In 1994, 7.3 million Americans required long-term care services costing each individual $43,800 per year. By 2000, this number had reached 9 million Americans at nearly $55,750 per year. By 2030, over 23 million Americans will require individual long-term care with projected costs reaching $300,000 annually.
  
  

Cost

• The cost of long-term care insurance will vary, depending on the options you choose. The actual premium depends upon your age, the level of benefits and the length of time you are willing to wait until benefits begin. Years ago, financial planners advised their clients to wait until age 65. This is no longer considered sound advice; the Federal and State Partnership Programs encourages people to buy at age 40. This will increase the financial security of the programs and reduce the number of people dependent upon welfare/Medicaid for long-term care.
  
  

Benefits

• Ensure that your policy benefits will keep up with the rising cost of home-health and nursing-home health care. Purchase a policy with the longest benefit payment; usually, this is about 6 years for home-health care and lifetime for nursing-home care. The policy should have no more than a 6-month pre-existing conditions clause; after that all medical conditions must be covered. The following expenses must also be covered: home modification, caregiver training, respite care, hospice care, therapeutic devices and bed registration fees.
  
  

Tax implications

• In 1996, the Health Insurance Portability and Accountability Act (HIPAA) made the premiums tax deductible and the benefits tax-free as long as the policy met certain conditions. Employers can deduct the cost of setting up a long-term care plan and their portion of the contribution premiums. Individual Retirement Accounts (IRAs) and 410k funds cannot be used to purchase private long-term care insurance, but tax-free funds deposited in Medical Savings Accounts can be used to pay premiums.
  
  

Precautions

• Choose an insurance company that has at least two financial strength ratings (AM BEST, Moody's, Standard & Poor's, Duff and Phelps). The industry is evolving at a rapid rate; deal only with an agent who has several years of experience with long-term health insurance. Ask for a sample copy of the exact contract and discuss it with your financial planner, children or lawyer. There is a "free look" period. If you buy the policy and decide that it does not meet your needs, you have 30 days to return it and get your money back.