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Long-term Care Insurance Benefits Grow in Value After Retirement

Armen Hareyan's picture

Long-term care insurance benefits

Business owners in search of a year-end tax deduction are increasingly opting for a little-known but highly valuable benefit that can be offered on a selective basis within a business.

Offered selectively means that the business can provide the benefit exclusively for certain groups or classes within the organization such as the businessowners and spouses or for key employees and their spouses. The benefit also can be provided for the entire work force if desired. Funding this benefit can help small and large business owners move money out of the company tax-free while providing a very important and valuable benefit.

The funding for this benefit can be completed before retirement with pre-tax dollars and a paid-up status would be guaranteed for life. There is often the option to have premiums returned to your estate at death. Any benefits received from this coverage are tax-free.

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This is not life insurance. Rather, it is long-term care insurance. This benefit will pay for extended periods of care whether that care is needed because of a sudden and unexpected injury or accident, chronic illness or a gradual decline in your health. Most of the time this care is provided in your own home, but it could be provided in a facility, if necessary.

Premium discounts are available to businesses. All premiums paid by the business for employees are fully tax-deductible for the business. Premiums paid for the business owner may be fully or partially deductible depending on the tax structure of the business. In any event, the benefit is not taxable to the covered individual, and any benefits received for care in the future would be tax-free.

Long-term care insurance should not be confused with long-term disability insurance.

Disability insurance is set up to replace income in the event of a chronic disability. In essence, it insures one's paycheck, it provides continued income to meet the usual expenses such as the mortgage, the car payment, utilities, groceries and all of the other day-to-day necessities.

Long term care insurance is set up to insure one's savings and investments. It provides the additional funds to pay for the care that is needed so that it is not necessary to deplete one's assets. This allows savings and retirement funds to continue to grow and ensures that those funds are there for their intended purpose -