Few business owners are aware that Uncle Sam offers tax benefits for those purchasing hybrid long-term care insurance.
"The tax advantages and long-term care planning options for businesses can be significant," says Jesse Slome, director of the American Association for Long-Term Care Insurance. "Tax deductibility is now possible with some of the hybrid long-term care policies people are increasingly purchasing."
A hybrid long-term care policy combines the benefits of life insurance or an annuity with long-term care benefits. "If it turns out that long-term care (LTC) is not needed, the life portion pays a death benefit to the designated beneficiary when the insured passes away," Slome explains.
All traditional long-term care insurance policies and a limited number of hybrid policies attached to life insurance with separately identifiable LTC premium components will offer tax deductibility. "Businesses formed as C-Corporations enjoy the most significant tax benefits," Slome notes. Some 90 percent of C-Corps have fewer than 100 employees according to Census data. "Every small and mid-sized business owner looking for tax and planning advantages would benefit by learning more," he adds.
According to the Association, an increasing number of insurance companies are offering hybrid long-term care options. The plans can vary however in terms of meeting the criteria for tax deductibility, policy costs as well benefit provisions. "It makes comparing the available options most worthwhile," Slome advises.
Among hybrid long-term care policies, potentially significant differences include how the insurer will eventually pay claims. "The differences can vary most in terms of how home care benefits are paid," Slome points out. "Some policies utilize a reimbursement formula with specific contractual limitations regarding who can provide care. Alternatively, a cash benefit method provides payments without such limitations including the ability to pay family members who are providing care."
"Cash payments provide the greatest flexibility and possibilities when care is needed," explains Tony Massenelli, Director, Long-Term Care Sales for Nationwide, a leading provider of hybrid long-term care solutions. "One of our plans provides a retroactive lump-sum cash payment for home care back to day-one after the 90-day elimination or deductible period is met."
Other differences include options that can increase the future value of available benefits. "An inflation growth option can address the risk of rising care costs," adds Slome who notes that most insurers offer a fixed rate formula. "Nationwide's CareMatters II policy also offers an inflation option tied to the increase to U.S. medical care costs, an option that a number of long-term care insurance specialists find is more relevant for their clientele."
To learn more about both traditional or hybrid long-term care insurance visit the American Association for Long-Term Care Insurance website. To receive no-obligation comparisons and long-term care insurance quotes from an independent specialist, call the organization at 818-597-3227.
About the American Association for Long-Term Care Insurance. Founded in 1998, AALTCI advocates for the importance of protecting against the real risk of needing long-term care and supports insurance professionals who market traditional and linked-benefit LTC insurance solutions. Visit https://www.aaltci.org for more information.