FINANCIAL FOCUS: Long-term care insurance helps you grow wiser today, older tomorrow

By Robert L. Nistendirk | Aug 27, 2009

CHARLESTON - Americans recognize the need to save for retirement. But few are mindful of the need to protect themselves against the steadily growing costs of long-term care services. Long-term care insurance can cover the costs of long-term care services and protect lifetime savings.

According to the Long Term Care Insurance National Advisory Center, the average American life expectancy is now 75 years for men and 84 years for women. Over half of Americans will spend part of these extended years in a long-term care situation.

In 1994, 7.3 million Americans needed long-term care services at an average cost of $43,800 per year. In 2009, the figure is near $75,000 per year. By 2030 it is projected long-term care will be needed by 23+ million Americans, with projected individual long-term cost reaching $300,000 annually per individual.

Long-term care insurance premiums are based on age at the time of purchase. Premiums for most policies stay level each year as you age. If you buy at age 50, a typical policy may cost $800 per year. However, if you wait until you are 65, the cost of the same policy could be $1,800.

This year, about nine million men and women over the age of 65 will need long-term care. By 2020, 12 million older Americans will need long-term care. Most will be cared for at home -- family and friends are the sole caregivers for 70 percent of the elderly.

A study by the U.S. Department of Health and Human Services says that people who reach age 65 will likely have a 40 percent chance of entering a nursing home. About 10 percent of the people who enter a nursing home will stay there five years or more.

You can usually choose coverage periods from two years to lifetime. About two-thirds of polices sold in 2008 had benefits periods of three, four or five years. The average length of a nursing home stay is about 2.4 years.

It is a common assumption that Medicare will help pay for long-term care. Medicare is health insurance for people over the age of 65.

Generally, Medicare doesn't pay for long-term care. Medicare pays only for medically necessary skilled nursing facilities or home health care. However, you must meet certain conditions for Medicare to pay for these types of care.

Medicaid is a government program that pays for certain health services and nursing home care for people with low incomes and limited assets. Who is eligible and what services are covered varies greatly from state to state. Most often, eligibility is based on your income and personal resources.

Long-term care and other medical expenses are allowed as itemized deductions on Federal Form 1040, to the extent they exceed the 7.5 percent threshold of adjusted gross income. Self-employed individuals can deduct premiums for qualified long-term care insurance on page 1 of Form 1040 whether they itemize or not, subject to an age-based cap.

West Virginia residents may deduct long-term care insurance premiums on their state income tax returns as well, to the extent the payments have not been allowed as a deduction when arriving at federal adjusted gross income.

The insurance benefits, for the most part, will not be taxable.

Nistendirk is a partner at Woomer, Nistendirk & Associates PLLC, a CPA firm located in Charleston. Bob has extensive experience in accounting, tax, strategic planning and financial/business consulting. He can be contacted at

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