Frequently Asked Questions About Long-Term Care Insurance Planning

Are all Long-Term Care Insurance policies the same?

The answer is no. While policies typically share core benefits, they are not all the same. Most insurance agents and financial advisors know very little about designing a policy because the industry and the product features evolve rapidly. Often, they will design a plan which costs much more than what you really need to spend, because they’re not as familiar with how plans are being used at the time of claim.

Is Long-Term Care Insurance Expensive?

No, most of the time long-term care insurance is very affordable. However, it can be more expensive if you are older or have major health issues. In general, long-term care insurance is affordable, and that affordability depends on your age, health and policy design.

What are the major parts of a Long-Term Care Insurance Policy?

There are more similarities in policies than differences. Let’s review the items a majority of long-term care insurance plans include

Do I have to report benefits from a Long-Term Care Insurance policy to the IRS?

Generally, no. Tax-qualified Long-Term Care Insurance benefits come to you tax-free. Insurance companies that pay long-term care insurance benefits are required by the Internal Revenue Service (IRS) to provide claimants with a 1099 LTC. This form is used to report the payments made under a long-term care insurance contract. Insurance companies usually issue these 1099 LTC Forms in January for the prior tax year.

I've read articles about rate increases. Can my premiums go up?

What you read is not always the full story. Most long-term care insurance policies are intended to have level premiums. There are some policies where the premium does go up each year, by design, as benefits increase or you elect to increase benefits. However, most policies have premiums which are intended to remain level based on your age at the time of application, your health, and the amount of coverage you selected. Since most people will select some kind of inflation protection, the premium is intended to remain level while the benefits increase—the cost of the inflation benefit is already factored into the premium. As you read articles about premiums increasing, be aware that there are plans that intentionally go up over time.

How are State Partnership Plans Different from Non-Partnership Policies?

Partnership policies look and act the same as any other long-term care policies! However, they provide additional asset protection as a reward for people who have planned in advance for the cost of long-term care.

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