Long-Term Care Insurance

Long-TermCare Insurance

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Tableof contents

Abstract………………………………………………………………………………………..3

Introduction…………………………………………………………………………………….4

Benefits…………………………………………………………………………………………4

i)Takes the financial and emotional burden off the familymembers………………….……4

ii)Taxation………………………………………………………………………………4

iii)Flexibility…………………………………………………………………………….5

Disadvantage………………………………………………………………………………….…5

i)Cost……………….………………………………………………………………..…5

ii)Qualifying……………………………………………………………………………5

ii)Group Cost………………………………………………………………………..….6

iii)Inflation………………………………………………………………………………6

iv)Difficulty in choosing coverage……………………………………………………….6

Alternatives

i)Personal saving plan………………………………………………………………….6

ii)The hybrid strategy…………………………………………………………………..7

Conclusion………………………………………………………………………………………7

References………………………………………………………………………………………8

Abstract

Thelong-term care insurance is a scheme that was set up to help theelderly. Individuals are required to register, pay a monthly premiumand enjoy the benefits later in their lives. The plan is present inCanada, United States and the U.K. The advantage associated with theplan is that it saves one’s investments and savings. It alsoreduces the burden on the immediate family members because they incurminimal costs when taking care of their parents’ health. The planis also preferred because the benefits are not taxed. It is alsoflexible since there are a variety of policies present. However, theinsurance is expensive to many people and has strict qualificationrequirements.

Longterm care insurance model was introduced in 1980’s. The conceptbehind the plan was to offer custodial care. The attention that isrequired when disabled or elderly persons become so frail that theyneed assistance with their dressing, eating, bathing or eventoileting led policy makers to conceive the plan. It provides care tothe insured beyond a predetermined period.Theage of an individual is not a determining factor in the long-termcare insurance model. It covers home and respite care, assistedliving, adult day care and the Alzheimer’s facilities. Since itsintroduction, it has gained both good and bad reputations. Thelong-term care plan is idealsinceit is has flexible payment plans and caters for health expenses ofthe elderly and thereby easing the burden on children and relativesof the senior citizens.

Benefits

Ittakes the financial and emotional burden off the family members

Sincemany old people may feel less comfortable relying on their childrenor other members of the family for assistance, the long-term careinsurance may help cover the out-of-pocket expenses. DeLa Maisonneuve and Martins (2013) provide that the planreduces the burden that may otherwise fall on these people. Forinstance, when one pays for the home care, the insurer pays for thecost of having a house helper or a therapist. Without such care andcover, citizens would find it challenging to cope with their dailyneeds.

ExemptedTaxation

Anotheradvantage is that the benefits from the long-term care insurance arenot taxed. However, the premiums paid may be eligible for an incometax deduction. Kimand Lim (2015) state that itmakes the actual premium cost lower when compared to the companycharges. On the other hand, the business deductions of the samedepend on the type of the employer. For those under corporations, thepremium paid for the employees are hundred percent deductible.

Flexibility

Anotherbenefit is that it has flexible premium plans. Individuals may firstestimate the amount of care they need in future and relate it to theincome sources they have. Shelton(2013) providesthatifone feels that income will be adequate to provide care in old age, heor she may opt for a scheme that requires low premiums. It hasadditional policies and hence upon applying for the basic long-termcare insurance, the covered person may add other options to theexisting plan after evaluating his or her current health conditionand needs. Flexibility also manifests in that long-term careinsurance model allows its clients to obtain services from any oftheir preferred assisted living facilities or the private nursinghomes.

Disadvantages

Cost

Oneof the major disadvantages of the scheme is that it is expensiveespecially for the middle-class income earners. DeLa Maisonneuve and Martins (2013) provide that itsannual cost is expensive and not all people can afford it. Inaddition, the policies do not have a fixed premium henceunpredictable while budgeting one’s income.

RestrictiveQualification

Ifan individual has health issues or a specific medical condition, thenit would be difficult to qualify for a cover. Alternatively, theperson may be requested to pay more. Nonetheless, the long-term careinsurance does not cover all the health conditions or all types ofcare services (Shelton,2013).Some policies of the scheme have strict eligibility conditions forissuing benefits. If the insured does not meet all the conditions atold age, then the benefits would not be disbursed.

GroupCosts

Ifa person’s policy is via the employer, then it is a group scheme.Thus, an individual could be paying more than required. DeLa Maisonneuve and Martins (2013)demonstrate that if one is younger than the average age of thecoworkers, then he or she is paying higher premiums to cover theolder and sicker employees.

Inflation

Itwould be difficult for an individual to ensure that the basic policyapplied for, will be adequate at the required time. Thus,inflationwill inevitably erode the purchasing power of the policy applied whenthe time to use it arrives (Kim&amp Lim, 2015).The argument is attributed by the notion that the nursing care costswill have probably gone up.

Difficultin choosing Coverage

Itwould be challenging for a person to try and balance a policy so thatit fits the gaps in the cover that he or she already has. Anindividual may have life insurance via a whole life policy that isaccumulating cash value in addition to some limited right tolong-term care insurance coverage via Medicare (Kim&amp Lim, 2015).One would wish to choose a scheme that maximizes the benefits and notduplicate what is already there.

Alternatives

Personalsaving plan

Individualsmay decide to avoid the long-term care insurance plan due to itsdrawbacks. Shelton(2013) states that oneof the best alternatives would be to save enough money and otherresources to cater for future needs. If one can develop a dedicatedlong-term care investment account and syndicate it with home equity,then later life would not be hectic.

Thehybrid strategy

Itis also referred to as an asset-based policy. The scheme has amaximum daily benefit of 150 dollars and an optimum benefit pool ofapproximate 150,000 dollars which is also the death benefit (Shelton,2013).The maximum period for cover is thirty-three months and has aone-time premium of 72,330 dollars. The single premium option helpspeople budget their money which they intend to use in future. Thepolicies includedinthe plan are the spousal benefit, return of premium and the lifetimerider option.

Conclusion

Thelong-term care insurance plan is preferablesinceit reduces the financial burden of people when they get old. However,it should be reviewed to accommodate even those who are earning lessor those who are not employed for them to feel comfortable abouttheir future. It should also relax some of the rules that deprive offthe benefits to the insured. Nonetheless, if the application of thesechanges would be complicated, then there are alternatives already inplace to cater for the future life of everyone.

References

DeLa Maisonneuve, C., &amp Martins, J. O. (2013). Publicspending on health and long-term care.

Kim,H. B., &amp Lim, W. (2015). Long-term care insurance, informal careand medical expenditures. Journalof Public Economics,125,128-142.

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Shelton,P. R. (2013). Protectingyour family with long term care insurance: A complete guide to longterm care planning including traditional and hybrid policies andalternative funding options.

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