Long term care insurance has been on the market for more than 30 years. Unfortunately, only a few Americans who need coverage have a policy. In fact, according to the 2017 Insurance Barometer study of LIMRA, out of 57% said they need long term care insurance only 14% have a policy.
As the aging population in the United States continues to rise, more Americans particularly employees are feeling the impact of long term care be it directly or indirectly. They begin to realize that it’s possible for them to take care of their aging parents or they would need long term care someday, which make them more willing to buy a policy that can help – long term care insurance.
According to Genworth, 4 out of 5 Americans want to have the option to purchase long term care insurance at work. Around 68% even indicated that they would buy a policy at work if they have that option.
Employers answered the desires of their employees by offering group long term care insurance, which is less expensive than the former. However, this is only true in some cases. It’s still best to compare individual and group long term care insurance first since many policies offered by companies do not have the same features and benefits that individual policies have.
But, is group long term care insurance really better than an individual policy?
Let’s find out!
What is Group Long Term Care Insurance?
Group long term care insurance is also known as employer-sponsored long term care insurance is a product offered by employers that help Americans pay for long term care expenses – nursing homes, assisted living and more. A group plan is designed to fit the employee’s needs as well as the needs of their families, and their budget.
Why Is Employer-Sponsored Long Term Care Insurance Better?
An employer-sponsored long term care insurance has several advantages and they are as follows:
1. Simplified Underwriting
You can become eligible for long term care coverage despite having illnesses or health conditions because of its simple underwriting. So, this is the best policy if you have health issues that would make it impossible for you to get coverage or you would be required to pay high premiums.
2. Affordable and Stable Premiums
Premiums of employer long term care insurance are usually lower compared to individual policies. Also, it is designed to have premiums that will less likely increase unless you add more features to your policy.
3. Tax Deductible
Group long term care insurance can be 100% tax deductible but only for C-Corporations. Also, it can be partially deductible to other types of corporations.
4. Helps Protect 401(k) and Addresses Gap in Employees Financial Plan
It fills in the gap in the financial plan of employees by helping them prepare for expensive health care or long term care expenses.
5. Group Discounts and Unisex Rates
Premiums are gender neutral in employer-based long term care insurance unlike in individual policy that is based on age, marital status and state of residence.
Who Sells Group Long Term Care Insurance?
There are two types of employer-sponsored long term care insurance today, true group policies and multilife policies.
True Group Policies
Employers with 500 or more employers usually offer traditional true group policies. Right now, there are only a few group long term care insurance companies and some of them are Genworth and Prudential.
These companies provide coverage to individuals with health issues and pre-existing conditions such as insulin-dependent diabetes, drug addiction, alcoholism, HIV-positive, AIDS, and stroke. These individuals with health issues get coverage and they only pay the same rate as healthy individuals.
Insurers spread the risk among the premiums paid by all policyholders. In other words, those with good health subsidize those who have health issues.
Multilife
This type of employer long term care insurance packages individual policies together and offers a discount of 5% to 10%. This discount is also applicable to spouses and parents of both the employee and their spouse. But, the discount is only offered to a group that has 10 or more individuals that are eligible.
Insurers that sell long term care insurance companies are Genworth, Prudential, Transamerica, MedAmerica, Mutual of Omaha and John Hancock.
What is Long Term Care Insurance?
Long term care insurance is defined as a product offered to individuals that helps fund long term care services and facilities such as nursing homes, assisted living facilities and home care that individuals might need due to old age, injuries or illnesses.
Why is Long Term Care Insurance Better?
Individual long term care insurance has a lot of benefits and here are some of them:
1. Health Discounts
You are better off with an individual policy if you are healthy and a non-smoker. Long term care insurance companies evaluate an individual’s application based on age and current health status.
If you’re in good health, then you are eligible for 10% discount. Those with health issues would have to pay more since the companies or they will be declined for coverage if they are too risky to be insured. The percentage of applicants denied of long term care coverage due to health issues increases as they get older. So, delaying buying a policy is very risky and has its consequences.
2. Spousal or Partner Discounts
Insurers offer spousal discounts of up to 40% to couples and to domestic partners in most states.
3. Partnership Asset Protection
More states have approved long term care insurance partnership programs that provide additional benefits to individuals who buy limited-term policies that are more affordable. These policies provide coverage for around three or four years only.
4. Tax Deductible
Long term care insurance premiums are tax deductible but this only applies if your premiums are 10% higher than the adjusted gross income or AGI, which refer to all your personal funds.
Senior citizens or those who are 65 and up would only need their premiums to exceed their AGI by 7.5%.
Below is the recent tax deductibility limits.
Read Next: Long Term Care Tax Deductions
5. Comprehensive Long Term Care Coverage
An individual long term care insurance covers 100% of home care compared to a group policy that only covers 50% or 75% of home care. This means that you might pay out-of-the-pocket because you have a limited group policy.
Who Sells Individual Long Term Care Insurance?
Some of the top long term care insurance companies are Genworth, Mutual of Omaha and Transamerica. It’s best to compare insurers first by looking into the reviews and ratings of long term care insurance companies to find the right one for you.
Group Long Term Care Insurance vs Individual Long Term Care Insurance
Now that you already know how group long term care insurance and an individual policy works, you can start comparing these policies.
It’s recommended to compare their policy features based on these factors:
- Daily benefit
- Coverage for home care, nursing home and assisted living
- Benefit period
- Waiting period
- Inflation growth
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