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Long-Term Care Insurance Policy Basics Activities of daily living Qualifying for the benefits of a long-term care policy depends on your ability to perform normal activities of daily living. There are many activities we perform on a daily basis that we take for granted. Bathing, getting dressed, and eating are a few of those activities. As we age, become ill or disabled, our ability to perform these activities can be affected. Long-term care is needed when we need help performing essential everyday Activities of Daily Living (ADLs). Most long-term care policies will cover you when you need help with two or three of the the six ADLs. Depending on the specific policy, it may be easier to qualify for coverage in your home (two of six ADLs) rather than for coverage in a skilled nursing care facility (three of six ADLs). The six ADLs are: Bathing. Your ability to wash yourself in the tub, shower, or by sponge bath. Dressing. Your ability to put on or take off your clothes. You may need help fastening and unfastening buttons or zippers. Toileting. Safely getting to and from the toilet and performing basic personal hygiene. Transferring. Moving in and out of a bed, chair, or wheelchair. Eating. Your ability to feed yourself. You may need help grasping utensils, getting food to your mouth, and cleaning your face and hands after a meal. Continence. Your ability to voluntarily control bladder or bowel functions, or care for incontinence if it occurs. Some people can perform their everyday activities without help, but they may need care because they have problems with their memory or orientation. You could also need long-term care if you have what is called Severe Cognitive Impairment — confusion, disorientation, or memory loss that can result from conditions like Alzheimer's Disease. These individuals need supervision to ensure their safety. Terminology Here are some typical terms used in long-term care policies: Click on each of the features on the left to view the definition of each. Elimination Period       This is also referred to as an exclusion period. It is the length of time that you must be receiving long-term care before benefits in your policy begin to pay. This period can be set at 30, 60, 90, or 180 days, and in some cases as much as one or two years. However, this is typically coordinated with the very limited coverage provided by Medicare, 100 days. Benefit Period       The length of time that your benefits will pay. This can be set at one, two or five years, or they can be set up to pay for as long as you qualify (potentially a very long time). Benefit Amount       This is the specific amount your policy will pay as a benefit. Usually this is quoted as a daily figure. (For example - $130 per day in coverage). Some policies rather than quote a definitive benefit period (two years), will state a specific benefit amount such as $142,000. When that benefit is used up, the policy ceases to exist. Inflation Protection       This is what will allow your benefits to keep up with the inflation rate. It will typically increase your benefit amount without increasing your premium. (Note: in some policies, it will increase your premium.) This could be very important. The expectation is that in about 10 years, the annual cost of a skilled nursing care facility will be almost $100,000! Inflation protection would help pay for some of that dramatic increase. Taxation The importance of long-term care insurance is universally accepted in the Federal Government. Therefore long-term care policies are given some tax preferences. First of all, if you itemize your deductions, the premiums for a long-term care policy may be tax deductible. The requirement here is that those premiums must exceed 7.5% of your Adjusted Gross Income (AGI). Second, the benefits that you receive from the policy will be non-taxable. This is a very big advantage. Especially if you are in the average facility receiving about $65,000 - $70,000 per year in benefits. Keep an eye on our legislators as well. Congress has talked periodically about improving tax laws even more. The most recent discussions were about allowing the premiums to be paid from pre-tax income (just like tax-deferred plan contributions). For more information regarding taxes and long-term care insurance, please see your tax professional. < PREVIOUS NEXT> #38599