Independence and self-reliance are hallmarks of individuality, and no one wants to require assistance from others on a day to day basis. However, the majority of Americans will require some type of long-term care at some point in their lifetimes, and it is often the responsibility of children and family members to ensure that proper care is given. Most long-term care is given to elderly individuals over age 65. However, chronic illness or disability can strike any person at anytime, requiring the assistance of caretakers on a regular basis.
What is Long-Term Care?
Long-term care is a broad term that encompasses several types of services and assistance. They include anything necessary for the continued quality of life and well-being of the person requiring assistance. Some of those services include, but are not limited to, at-home health care, meal preparation and delivery, laundry services, household cleaning, personal hygiene assistance, physical therapy, errand services and lawn care. Those services may be delivered by loved ones, a formal care service, or a combination of the two. In some cases, long-term care is administered in a formal care facility, such as an assisted living center, a rehab center, a nursing home or a hospice.
The Cost and Burden of Long-Term Care
Long-term care is not without its costs. In fact, Americans spend billions of dollars out of pocket on long-term care every year. Those numbers do not take into account the vast number of caregivers who work to provide long-term care without pay or other compensation.
Unfortunately, many erroneously assume that the costs associated with ongoing care will be covered by Medicare, Medicaid or health insurance. Although these resources are a viable starting point for funding, extended care often requires additional cash — a cost that may fall on children or family members. The costs associated with long-term care may be so burdensome, that they drain retirement accounts and exhaust the assets of those requiring care, as well as their caregivers. When money is not available to cover all expenses, family members may be obligated to perform certain services themselves, such as bathing, cleaning and running errands.
Long-Term Care Insurance
An aging population and an increasing life expectancy have more and more people turning to long-term care insurance as a way of preventing the depletion of assets in the future. Insurance affords the best possible care while savings accounts and assets remain intact. All the while, relatives are alleviated of the burden that comes with caring for aging, ill or disabled family members.
Usually, long-term care insurance works by providing benefits after a predetermined period of time. Unlike health insurance, which requires a dollar-amount deductible, long-term care insurance may require a deductible (known as an ‘elimination period’) based on a specific period of time. For example, an insurer may offer to pay as many as five years of benefits for long-term care, but only after care is paid for out of pocket for a period of three months. Shorter elimination periods are available, albeit at higher premiums or with fewer benefits.
Fortunately for most, long-term care insurance premiums are tax deductible for employees and the self-employed at 100 percent up to the maximum deduction threshold outlined by the IRS each year. Individuals who are not self-employed and are planning to purchase a long-term care policy can also benefit from tax savings, as premiums are then calculated as medical expenses on Schedule A of IRS Form 1040.