Introduction to Buying Long-Term Care Insurance

Long-term care insurance is designed to help families afford the expenses associated with old age when an individual can no longer take care of himself or herself. It does not provide medical insurance but provides funds for expenses associated with the normal activities of daily living that might be provided by a professional caregiver.

There is a lot of discussion about the need for long-term care insurance and for whom it is most suitable. In order to determine whether long-term care insurance should be part of your long-range financial planning, you need to know the basics of long-term care and some of the history of the long-term care insurance industry.

If you already own long-term care insurance, you might want to consider the suitability of your current policy compared to newer policies. It is a fundamental rule in all insurance planning that an existing policy should never be canceled until replacement coverage is actually in place. This is particularly so with long-term care (LTC) insurance, since recent changes in the insured’s medical condition could disqualify him from a new policy at any price.

Additionally, remember that all LTC insurance contracts issued before 1997 were declared tax-qualified under the law. As such, a "grandfathered" policy automatically enjoys tax advantages that very likely would not be available if a policy with the same generous features were purchased today. Therefore, any decision to scrap pre-1997 LTC insurance should be made only after informed consideration of the tax and policy benefit issues.