Omega Financial Associates

What it is:

Insurance designed to reimburse long-term care expenses. Tax-qualified policies have two benefit triggers:

• 1. Loss of 2 out of 6 activities of daily living, or
• 2. Severe cognitive impairment. Conditions must be expected to last at least 90 days. Policies are usually purchased with premiums payable for life (or until benefits are triggered).

Advantages:

• Affordable to most investors. Early purchase decisions can lead to significant cost savings.
• Premiums are designed (but not guaranteed) to remain level for life.
• May be funded by retained investment income.
  (Example: mutual fund dividends)
• Popular employer option for new employee benefit.
• Wide range of plan design options.

Disadvantages:

• No benefit payments if LTC is never required.
• Lifetime premium payment responsibility unless a limited pay option is offered.
• Insurance company may raise rates on all policy holders.
• Recent industry experience has shown some major insurers exiting the LTC business.

Look for:

• Companies with high claims paying rating (A.M. Best “A” or above).
• Companies with long (10+ year) LTC history and a public commitment to remain in the business.
• Tax-qualified policies that pay income tax-free LTC benefits.
• Flexible plan design options.
• Companies that are price competitive in your client's age group.

Beware of:

• Non tax-qualified policies that may produce taxable LTC benefits.
• Premium quotes that are substantially below those offered by major LTC insurers.
• "Home care only" policies that provide no coverage if the insured is forced to reside in a nursing home.
• Companies with a history of repeated rate increases for policyholders.