The average lifespan is getting longer, but with it comes the likelihood that, as time goes by, we will run into accidents, illnesses, or old age when we need to be taken care of. Have you ever had an unforeseen health event that forced you to take a temporary stop? Long-term care and health care expenses require a stable flow of resources in old age, and new retirees will need to secure a certain standard of living. Is your pension sufficient to support you in case of illness or long-term care? Do you live alone? Are you single-income? When in doubt, it would be best to be prepared. Insuring is tantamount to having a lifesaver at hand for the future.
Long-Term Care Policies
There are specific life insurance policies that cover the expenses you incur due to loss of self-sufficiency due to accident, illness, or old age: long-term care policies. The benefit is paid when there is a presumably permanent inability to carry out, even with the help of special equipment, a minimum number (usually set at three) of the following ordinary activities of daily living called Activities of Daily Living (ADLs): washing, dressing, feeding oneself, going to the bathroom, moving around, and getting around. Upon payment of a one-time or periodic premium, the insured can obtain an allowance in the form of an annuity upon a reduction in self-sufficiency or will be eligible for certain care services. Would you rather have liquid resources or secure concrete assistance? And yet do you want lifetime or temporary coverage?
The types of policies
There is a benefit entitlement that is obtained only if the loss of self-sufficiency arises during the policy term; alternatively, there are policies that are valid for life. In addition, Long Term Care accumulation policies are linked to life insurance and provide for the accumulation of capital that will be converted into a lump sum or immediate annuity in the event of non-self-sufficiency. Even if the conditions of non-self-sufficiency are not realized, one will have the opportunity to regain possession of at least part of the capital.
The alternative is Long Term Care pay-as-you-go policies linked to health insurance, which do not provide for the accumulation of premiums paid and return nothing if the insured event does not occur. The premium covers the risk for the policy year for which it is paid and, consequently, are policies that are based on the concept of mutuality among policyholders. Which of these types suits your preferences or the costs you can afford based on age?
The tax advantages
Premiums for Long Term Care policies are 19% deductible up to a maximum limit of €1,291.14. In contrast, annuities received in case of loss of self-sufficiency are exempt from personal income tax. Could this be an advantage that makes you consider taking out a policy?
