Deferred Annuities
What is a deferred annuity?
A deferred annuity is an insurance product designed to provide income
at some time in the future - typically during retirement. The idea is
to let the premium payment you made to the insurance company accumulate
tax-deferred for a number of years.
If you choose a fixed, deferred
annuity, your money will accumulate at a fixed rate guaranteed*
by the insurance company for a specified period of time.
If you choose a variable, deferred
annuity, your money will accumulate at a variable rate, based upon
the performance of the underlying investments. The investment return
and the value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original
cost.
When you no longer wish to keep accumulating
funds in your annuity, you may take the money out as a lump sum or annuitize
it (convert it to income payments). If you annuitize, you have a choice
of several standard pay-out options. Liquidations of earnings are subject
to ordinary income tax and, if taken prior to age 59 1/2, a 10% federal
income tax penalty may also apply.
* Guarantees
are based on the claims-paying ability of the insurer.
Fixed, Deferred Annuities
What is a fixed, deferred annuity?
A fixed, deferred annuity is an insurance product that offers a fixed
interest rate guaranteed* by an insurance company for a specified period
of time (sometimes called a guarantee period ). With this form of retirement
savings, the premium you pay to the insurance company accumulates on a
tax-deferred basis and the insurance company usually guarantees* the return
of your principal investment.
Example
Mr. and Mrs. Smith, both in their early 50's,
have received a $40,000 inheritance and would like to use this money
for their retirement income later on. Their financial advisor has
explained that an annuity may be a suitable product for them. The
Smiths have a very low risk tolerance and they will need this money
for their retirement. They decide that a fixed, deferred annuity is
perfect for them because they do not need the money right now and
they do not want to risk losing their principal investment.
What are the advantages of a fixed,
deferred annuity?
- Tax-deferred accumulation
- Guaranteed return of principal*
- Guaranteed interest rate*
- Choice of guarantee period with many
fixed annuities
- Not subject to stock and bond market
fluctuations
- No fees or charges with many fixed
annuities.
* Guarantees
are based on the claims-paying ability of the insurer.
What are the disadvantages of a fixed,
deferred annuity?
- No flexibility. You may not change
any applicable guarantee period or interest rate once you pay your
premium.
- Not a liquid investment. Liquidation
of earnings is subject to ordinary income tax and, if taken prior
to age 59 1/2, a 10% federal income tax penalty may also apply. Early
surrender charges may also apply.
For what type of investor is a fixed,
deferred annuity suitable?
It may be a suitable investment for someone:
- Seeking a fixed rate of return
- Wishing to diversify their overall
retirement investment portfolio
- Who has already reached maximum contribution
levels in a 401(k) plan and any IRAs they may have.
- Not wanting to worry about market
fluctuations or having to actively manage their investments.
May one make withdrawals from a fixed,
deferred annuity?
Certain withdrawals from fixed, deferred annuities may be subject to:
- Surrender charges
On many annuities, the insurer may assess a surrender charge -- typically
ranging from 7 percent to 1 percent of the withdrawal amount, based
on a schedule where the amount of the surrender charge declines over
time. There are some exceptions. Some annuities allow the annuitant
to annually withdraw a certain amount (for example 10%) without a
surrender charge.
- Market value adjustments
Some fixed annuities contain a market value adjustment that applies
when you take a full or partial distribution. With some types of fixed
annuities, the market value adjustment may increase or decrease the
value of your distribution, depending whether the interest rates currently
being offered for your type of annuity have risen or fallen since
your guarantee period began. If they've fallen, the adjustment may
result in a higher payment. If they've risen, your payment may be
lower. With some types of annuities, there is no market value adjustment
if you surrender your annuity at the end of a guarantee period.
- Federal income tax penalties.
Withdrawals before age 59 1/2 may be subject to a 10 percent Federal
Income Tax penalty.
Ask your financial consultant if any of these apply with the annuity you
are considering.
Pay-out options available
Most annuities offer several standard
pay-out options - ranging from pay-outs for a specified period of time
(Period Certain), to pay-outs for life.
Click for more pay-out
options information.
Variable, Deferred Annuities
What is a variable, deferred annuity?
A variable, deferred annuity is a long-term insurance product that enables
the premium paid to the insurance company to accumulate tax-deferred
with a variable rate of return. Within the annuity, there is a choice
of investment options (called sub-accounts) that will allow for management
of investment choices over time. The sub-accounts invest in underlying
funds that, in turn, invest in various types of securities (i.e.,stocks,
bonds, money market instruments) each with a different risk/return profile.
The return on your annuity will depend on the performance of the investment
options you choose.
Example
Nancy Edwards, 56, makes the maximum contribution to her 401(k)
plan at work each year and also has an IRA to which she contributes
the maximum annual amount. This year, she receives a bonus for which
she doesn't have an immediate need. She decides she would like to invest
$15,000 of her bonus and let the earnings accumulate on a tax-deferred
basis. Knowing that Nancy is financially savvy and is a moderately aggressive
investor, her financial advisor suggests a variable, deferred annuity
with a mix of equity and bond investment options. Nancy is willing to
take the risk of either profiting or losing from this investment.
What are the advantages of a variable,
deferred annuity?
- Tax-deferred accumulation
- Ability to choose among investment options
- Potential for more rapid accumulation than with a fixed annuity.
What are the disadvantages of a variable,
deferred annuity?
- No guaranteed rate of return on variable investment options
- No guarantee of principal
- Not a liquid investment. Liquidation of earnings is subject to ordinary
income tax and, if taken prior to age 59 1/2, a 10% federal income
tax penalty may also apply. Early surrender charges may also apply.
- Subject to fees and charges from the annuity contract and from the
underlying investments.
For what type of investor is a variable,
deferred annuity suitable?
A variable, deferred annuity can be a suitable investment for someone:
- Who does not require a fixed rate of return and with a tolerance
for risk
- Who has already reached maximum contribution levels in his or her
401(k) plan and in any IRAs
- Who likes to manage their own investments
May one make withdrawals from a variable,
deferred annuity?
Certain withdrawals from variable, deferred annuities may be subject to:
- Surrender charges
On many annuities, the insurer may assess a surrender charge -- typically
ranging from 7% to 1% of the withdrawal amount, based on a schedule
where the amount of the surrender charge declines over time. There are
some exceptions. Some annuities allow the annuitant to annually withdraw
a certain amount (for example 10%) without a surrender charge.
- Federal income tax penalties
Withdrawals before age 59 1/2 may be subject to a 10 percent Federal
Income Tax penalty.
When speaking with your financial consultant, ask if any of these apply
with the annuity you are considering.
What pay-out options are available
when I get ready to receive income from my annuity?>
Most annuities offer several standard pay-out options - ranging from
pay-outs for a specified period of time to pay-outs for life.
Click for more pay-out
options information.
Immediate Annuities
What is an immediate annuity?
An immediate annuity is an insurance product designed to convert assets
into income immediately (typically within 30 days and seldom longer
than 12 months from the date of purchase). The consumer pays a premium
to the insurance company and the insurance company makes a stream of
periodic, income pay-outs** to the annuitant. As is the case with deferred
annuities, immediate annuities can either be fixed or variable.
** Taxable Distributions (and certain deemed distributions) are
subject to ordinary income tax.
With a fixed, immediate annuity,
your periodic pay-out amount will always stay the same. With a variable,
immediate annuity, your periodic pay-out amount will fluctuate,
based on the performance of the investment options you have chosen within
the annuity.
Fixed, Immediate Annuities
A fixed, immediate annuity
is an insurance product that offers a fixed, periodic payment to you,
the annuitant, to begin shortly (usually about a month) after you pay
your premium to the insurance company. You choose the time frame over
which you will receive your pay-outs
- Either for a specified period (called
a Period Certain )
- Or for the rest of your life.
The most common usage of this type of
annuity is to convert assets into a steady income during retirement.
Example
Mr. Johnson, age 71, is a conservative
investor who wants to have additional monthly income. He plans to sell
about $50,000 of mutual funds that he currently owns and use the proceeds
to buy a 10-year Period Certain Fixed, Immediate Annuity. His
fixed pay-outs will begin in about a month. He likes the idea that he
won't have to worry about market fluctuations with the mutual funds
any more and that his pay-outs will be the same every month. He also
likes the fact that, should he die before the 10-year period is over,
his beneficiary will receive any remaining payments from that Period
Certain.
What are the advantages of a fixed,
immediate annuity?
- Guaranteed* periodic pay-outs**.
- Pay-outs begin immediately.
- Pay-out amount is not subject to market
fluctuations.
* Guarantees
are based on the claims-paying ability of the insurer.
** Taxable Distributions (and certain deemed distributions) are subject
to ordinary income tax.
What are the disadvantages of a fixed,
immediate annuity?
- No choice of investment options.
- No flexibility. You may not change
your pay-out option or your periodic pay-out amount once the pay-outs
begin.
- Not a liquid investment. Withdrawals
are not allowed unless the annuity has a commutation (cancellation)
provision.
For what type of investor is a fixed,
immediate annuity suitable?
- Is seeking a fixed, periodic pay-out
- Does not want to worry about market
fluctuations and have to manage their investments.
Can one make withdrawals from a fixed,
immediate annuity?
No. Withdrawals from a fixed, immediate annuity may be made only if
there is a commutation (cancellation) provision written in your annuity
contract.
What pay-out options are available
from a fixed, deferred annuity?
Most fixed, deferred annuities offer several standard pay-out options
- ranging from pay-outs for a specified period of time (Period Certain)
to pay-outs for life.
Click for more pay-out
options information.
Variable, Immediate Annuity
What is a variable, immediate annuity?
A variable, immediate annuity is an insurance product designed to produce
pay-outs that will vary depending upon the performance of the investment
options you choose. At the time you pay your premium to purchase the
annuity, you choose from several underlying investment options (called
sub-accounts). The sub-accounts, in turn, invest in underlying securities
that can range from stocks to bonds to money market instruments. You
choose the investment options based your assessment of their potential
performance and on your own risk tolerance.
Unlike a fixed, immediate annuity, you
may make some changes to your variable, immediate annuity after the
pay-outs begin. You may change your investment options as frequently
as your particular annuity allows. You may not, however, change your
pay-out option.
Example
Mr. and Mrs. Ford, ages 70 and 72, have a sum of money that they would
like to use to purchase an annuity. They have discussed with their financial
advisor that they already have enough income to fund their retirement.
They would like to purchase an annuity and be able to choose their investment
options with the potential of profiting from favorable performance.
Because the Fords are savvy investors, their financial advisor suggests
a variable, immediate annuity because they want to receive pay-outs
immediately, but they do not need a defined pay-out.
What are the advantages of a variable,
immediate annuity?
- Ability to choose underlying investment
options
- A stream of periodic income payments**.
- Potential for higher returns than
a fixed annuity.
** Taxable
Distributions (and certain deemed distributions) are subject to ordinary
income tax.
What are the disadvantages of a variable,
immediate annuity?
- Pay-outs are not guaranteed - they
are subject to market fluctuations
- No guaranteed return of principal
- No liquidity. The only way that withdrawals
can be made from an immediate annuity is if there is a commutation
provision written in your annuity.
- Subject to investment management fees
and other charges.
For what type of investor is a variable,
immediate annuity suitable?
- Is willing to have his or her periodic
pay-outs fluctuate
- Does not mind managing his or her
investments.
Can one make withdrawals from a variable,
immediate annuity?
No. The only way you can make a withdrawal from a variable, immediate
annuity is if there is a commutation (cancellation) provision written
in your annuity contract.
What pay-out options are available
from a variable, immediate annuity?
Most annuities offer several standard pay-out options - ranging from
pay-outs for a specified period of time (Period Certain) to pay-outs
for life.
Click for more pay-out
options information.
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Annuity Pay-Out Options
What are the pay-out options if I
choose to annuitize (convert my assets to income payments)?
Both fixed and variable annuities offer similar pay-out options.
The most common options are listed here.
| Pay-out Option |
Length of Payments |
Payment to Beneficiary |
Example |
| Life Only Annuity
|
The annuitant will
receive pay-outs for the rest of his or her life. Under this option,
it is possible to receive only one pay-out |
No death benefit
with this option. |
John purchases a
life annuity and lives for three more years, receiving pay-outs
over that time. Upon his death, no death benefit is payable. Susan
purchases a life annuity and lives for 25 years, receiving pay-outs
over that time. Upon her death, no death benefit is payable. |
| Period Certain
Annuity |
The annuitant will
receive guaranteed* pay-outs for a specified period of time (Period
Certain). This period is typically expressed as a number of years
(i.e., 10, 15, or 20 years). |
If the annuitant
dies before the specified period ends, the beneficiary will receive
pay-outs for the rest of the Period Certain. |
Bill buys a 10-year
period certain annuity and he dies in the 3rd year. The beneficiary
will receive payments for the remaining 7 years. |
| Life Annuity
with Period Certain |
The annuitant will
receive periodic pay-outs for the longer of his/her lifetime or
a specified period (Ex. Life with 10 years certain). |
The beneficiary
will receive payment if the annuitant dies before the specified
period has expired. |
Maria buys a Life
with 10-year Period Certain annuity and she later dies in the
third year. Her beneficiary receives payments for the 7 remaining
years. However, if she were to die in the 11th year after purchasing
the annuity, the beneficiary would receive nothing. |
| Joint and Survivor
Annuity |
Payments are made
for the duration of 2 lives. Upon the death of the first annuitant,
the second annuitant receives a percentage (typically ranging
from 50-100%) of the amount the first annuitant received. |
No death benefit
with this option. |
Tom has chosen a
Joint and Survivor with 50 percent continuation benefit for him
and his spouse, Jill. When Tom dies, Jill will continue to receive
pay-outs for the rest of her life, but each pay-out will only
be 50% of the periodic pay-out he received. When Jill dies, no
death benefit will be payable. |
| Joint and Survivor
With Period Certain |
Payments are made
for the duration of 2 lives. Upon the death of the first annuitant,
the second annuitant receives a percentage (typically ranging
from 50-100%) of the amount the first annuitant received. In addition,
the annuitants may choose a minimum period (Period Certain) over
which they will receive guaranteed payments*. |
If both annuitants
die before the Period Certain ends, a beneficiary will receive
any remaining guaranteed* payments. |
Jim and Martha purchase
a Joint and Survivor Annuity with 50% continuation benefits and
a 10-year Period Certain. If Jim dies in year 3, Martha will continue
to receive pay-outs, but the amount of each pay-out will be 50%
of the amount he received. If Martha dies before the end of the
10th year, any remaining pay-outs will go to a beneficiary. If
Martha dies after the end of the 10th year, no death benefit will
be payable. |
| Life Annuity
with Cash Refund |
With this option,
the annuitant receives guaranteed* periodic pay-outs for the rest
of their life. If the annuitant dies before receiving the amount
of his/her premium payment back as pay-outs, any remaining pay-outs
go to a beneficiary. NOTE: For immediate annuities, a beneficiary
will receive any remaining premium if the annuitant dies before
receiving the amount of his or her premium back as pay-outs. For
deferred annuities, if the annuitant dies before receiving any
pay-outs, the beneficiary will receive the account value of the
annuity. |
Upon the death of
the annuitant, the beneficiary will receive the remainder of the
premium (or in the case of a deferred annuity, the account balance.)
|
Juan makes a premium
payment of $100,000 to purchase an immediate Life Annuity with
Cash Refund. He dies several years later, after having received
only $75,000 back in the form of pay-outs. His beneficiary will
receive the remaining $25,000. |
* Guarantees
are based on the claims-paying ability of the insurer.
** Taxable Distributions (and certain deemed distributions) are subject
to ordinary income tax.
How the pay-out option choosen affects
the monthly benefit
This chart, for an immediate fixed annuity
pay-out only, shows how a monthly annuity benefit amount is affected
by the pay-out option chosen.
| Assumptions |
|
| Annuity type: |
Fixed, Immediate |
| Premium Amount: |
$100,000 |
| Annuitant: |
Male, Age 60 |
| Joint Annuitant (if
applicable): |
Female, Age 62 |
Example: How Choice
Of Pay-out Option Affects Benefit Amount
| Pay-out
Option |
Monthly
Benefit paid to annuitant |
Provisions
for beneficiary or co-annuitant |
| 10 yr. Period Certain
Annuity |
$1,125.13 |
If the annuitant dies
before the 10-year Period Certain ends, the beneficiary will receive
the remainder of the payments for the 10-year period. |
| Life Only Annuity |
$724.96 |
No death benefit. |
| Life Annuity with 10
yr. Period Certain |
$714.41 |
If the annuitant dies
before the 10-year Period Certain ends, the beneficiary will receive
the payments for remainder of the 10-year period. |
| Life Annuity with cash
refund |
$698.72 |
If the annuitant dies
before receiving the $100,000 premium back as pay-outs, the beneficiary
will receive the difference. |
| Joint and Survivor
Annuity with 50% continuation |
$693.51 |
The co-annuitant will
receive a monthly benefit of $346.75 upon the death of the primary
annuitant. |
Joint and Survivor
Annuity
With 50% continuation and 10-Year Period Certain |
$688.42 |
The co-annuitant will
receive a monthly benefit of $344.21 upon the death of the primary
annuitant. If both annuitants should die before the end of the 10-year
Period Certain, the beneficiary will receive any remaining payments
at the 50% level. |
The above information was
provided by
Hartford Life Insurance Company
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Guaranteed
Acceptance Life Insurance
Some companies are now
offering Guaranteed Acceptance Life Insurance to people whose age, health
or pocketbook may prohibit them from being able to purchase life insurance.
Unlike underwritten life insurance policies, you are not required to
answer any health questions or take a physical. Usually these plans
include a limited benefit period. If death occurs during the first few
years, a reduced benefit is payable or the company will return the premiums
paid plus interest. This allows the company to guarantee your acceptance.
|
Guaranteed Acceptance
Life Insurance provides extra protection to help cover final expenses,
unpaid medical bills, outstanding loans and credit card payments.
Even if you already have some form of life insurance, you may
still be underinsured due to inflation and the rising costs of
final expenses.
Colonial Penn Life Insurance Company offers a guaranteed
acceptance life plan for about a quarter a day, for ages 50-85
(most states). There are no health questions asked and no physicals
to take. Your benefit is based on your age at the time your coverage
goes into effect and will not decrease because you grow older.
In addition, the rate will never increase. Guaranteed acceptance
is made possible by a 2-year limited benefit period.
For information about
our
Guaranteed Acceptance Life Insurance, click here. |
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Health Insurance
Medicare
Those who have worked for
a time in the United States, and their spouse, are generally eligible
for Medicare. The age of eligibility is 65, unless there is a disability
involved, in which case one may be younger to qualify.
A person who is 65, a legal
resident of the United States and has been so continuously for 5 years,
may be eligible to buy into Medicare by buying into Part A and also
Part B coverage of medicare. The buy-in amount varies and can be determined
for you by workers in your local Social Security office.
Even if
you are not going to file for Social Security at 65, FILE FOR MEDICARE
at 65. If you delay filing, it may cost you more money to file later!
Medicare
is divided into Part A and Part B coverage.
Part A, provided free
of patient premiums to those who have worked the necesary number of
quarters, includes:
- In-patient hospital care for up
to 90 days in a benefit period.
- A Benefit Period ends when you've
been out of the hospital 60 consecutive days.
- There is no limit to how many
benefit periods you can have.
- There are 60 reserve hospital
days that can be used in any benefit period.
- There is a deductible of $840
per hospital stay per benefit perior.
- The deductible is paid by
the patient (or a medigap insurance
provider).
- From 61-90 days there is a
per day co-pay.
- Inpatient care in a participating
skilled nursing facility
- Home health care (distinguished
from non-medical home help)
- Hospice care
Part B
is provided at a premium "which most people pay through an automatic
deduction from their social security check" and helps pay for:
- Doctor services.
- Outpatient hospital care.
- Diagnostic tests.
- Durable medical equipment.
- Ambulance services.
- Many other health services/supplies,
not covered by Part A.
- Part B deduction is $78.20 per
month starting in 2005 with a $110 deductible.
If you live in a rural
area Medicare regulations enable some reimbursement of home care visits.
Your closest Social Security Office can provide details regarding availability
in your state. This is another segment of trying to provide better services
overall for seniors in rural regions of the country. Earlier efforts
to provide for rural patients was approval of limited telehealth services
for "teleradiology" and "telepathology".
Some seniors qualify for Supplemental Security Income
Program (SSI) because of a "disability" or other exceptional circumstance
and "low income". Eligibility for maximum payments under SSI are reduced
by "countable" income and assets beyond home ownership. Some states
supplement the SSI payment from Medicare when a qualified recipient
lives in a care home. SSI recipients may also qualify for additional
help i.e. food stamps or medicaid.
Medicare and SSI information
provided here is meant to be a primer, and a place to start. It is not
meant to replace information available from Medicare.
The Medicare Hotline
is 1.800.633.4227.
They can provide:
- "Your Medicare Handbook" (the latest
update version) free of charge. The Handbook, Publication No. HCFA
10050 provides explanations about Part A (Hospital Insurance)
and Part B (Medical Insurance) of Medicare coverage. It lists
carriers of Part B coverage by state and explains Part B enrollment
procedures. It also lists, by state, where to call for information
regarding the quality of care in Medicare-certified facilities.
There is an application for sending away for additional free publications,
that deal with Medicare questions relating to specific medical conditions
and treatments.
- A toll free number for your State
Counseling Office.
The Medicare
Fraud Hotline is 1.800.447.8477.
It is operated 8 a.m. to 5:30 p.m Eastern Standard Time.
They are interested in suspected instances of Medicare fraud.
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Supplemental
Insurance to Medicare
Medical Insurance and medical
coverage can be obtained from private providers to help pay for doctor
and hospital care costs not covered by Medicare A and/or B through:
Health Maintenance
Organizations (HMO's)
- These organizations negotiate pricing
and coverage agreements with private physicians and hospitals.
- They accept government medicare payments
as premium payments, or the bulk of the premium payment.
- They may provide patient treatment
with little or no deductibles or a small or no co-pay.
- Are run as a business.
- They have many regulations regarding
circumstances of care.
- They control patient out of pocket
costs if patients accept their services.
- They can only be expected to cover
emergency care when care is received outside their service area from
non-group providers.
Things to
compare between HMO's:
- Patient co-pay requirements for:
- Hospitalization
- Choice of doctors
- How nurse practictioners are used
in patient care
- Doctor visits
- Prescription limitations and coverage
- Dental care
- Eye care
- How existing conditions are handled
- Which procedures available for
your present conditions are included or exempted
- Number of consecutive days you
may travel away from home
- Conditions of coverage when out
of the USA or their service area - Convenience of doctor groups
and hospitals
Links for More HMO Information
Medigap or Medicare Supplemental
Insurance
Legislation standardizes this insurance
into ten plans. They are referred to by letters A - J. All oplans ffer
some coverage for what is not covered in part A of Medicare. Plans B
- J, offer insurance covering for additional "services" medicare does
not cover. i.e. J includes coverage for Part A costs, as well as many
non-covered charges from part B.
In comparing policies, remember that all insurance providers must
provide categories A - J with similar features. So within each designated
category, compare insurance coverage by:
- Quality of service they will provide
- Premium costs
- Existing condition clause
- Built-in premium increases
- Age triggered increases
- Inflation factors for increase in
benefit coverage
- Guarantee of renewability
- Ability to upgrade to a higher letter
coverage at a later date
Additional Information:
Medicare Supplemental Insurance - Comparing quotes allows you to find the best possible rates on Medigap plans. MedicareSupplementalInsurance.com makes it easy to compare providers to get the best possible price on your health insurance.
Medicaid
Medicaid is federally funded, and administered
by states under their State Department of Insurance (
found in Resources by State. How "poor" you have to be to be eligible
for Medicaid varies by state. Divesture of assets including spousal
impoverishment (through asset transfers) in order to qualify for Medicaid
may differ. How much a couple may have in "assets" is presently approximately
$87,000, $2,000 for an unmarried nursing home resident. For a couple,
the maximum monthly income is approximately $2,200, but again this differs
by state. The asset limit and income for a married couple are adjusted
annually by each state.
If you want Medicare and Medicaid to
work together to cover the cost of medical care, select providers (doctors,
hospitals, etc.) that accept both Medicare and Medicaid.
Check at http://www.hcfa.gov
for your state information.
Exemptions to your "assets" value may be:
- The permanent home the well spouse
occupies, or that the nursing home patient wishes to return to
- One car
- The value of the premium in an annuity
- (The annuity amount paid out to the
annuitant usually counts in income qualifications)
Generally regulations require residence
in a long term care facility or skilled nursing home for Medicaid eligibility.
But in some states a case by case investigation may allow some to be
eligible when receiving medical care at home.
Long Term Care Insurance
Medicare, HMO's and Medigap
insurance do not pay for
nursing home care for long term stays or for Assisted Living.
Insurance can be purchased to help pay
for these costs. Without it, a one year stay in a nursing home, estimated
at $25,000-$42,000 per year, can wipe out a family nest
egg. It can leave the well spouse without financial resources for their
living expenses.
When shopping for Long Term Care insurance compare:
- Premium costs
- How long has the company been writing
this insurance
- What is their history on pay-outs
- If there is a company history of premium
increases
- Is a "partnership" policy available
- Is the policy tax qualified
- What will the insurance policy cover
- Nursing home
- Home care
- Care-giver training for home care
- For how many years will it pay
- How does the policy treat pre-existing
conditions
- How much will it pay per day
- Is it indexed for inflation
- How is the indexing calculated
- Under what conditions are premiums
waived
- What medical benefits are covered,
besides basic nursing home costs
- How many days must you wait before
coverage starts: 1, 30 or 90 days: referred to as the "deductible"
- How does this fit with your managed
care coverage or Medigap insurance coverage
- What is the daily benefit maximum
- For how many years, months, does
coverage last, or is there a maximum pool of money
- What optional benefits are available
- What is the daily rate for nursing
homes in your area now
Tax Qualified Long Term Care Insurance
vs. Non-Tax-Qualified Policies
Understanding the differences
between tax-qualified and non-tax-qualified long term care insurance
plans is important when considering the purchase of long term care insurance.
As the names imply, tax-qualified plans provide the purchaser with certain
tax advantages, including the assurance that benefits paid reimbursing
them for qualified long term care service costs will be excluded from
their taxable income, while non-tax-qualified plans do not provide the
same assurance.
Another advantage is that
premiums paid for tax-qualified long term care insurance plans can be
deducted as medical expenses by taxpayers who itemize (subject to Internal
Revenue Code limits). And, proposed federal legislation for an above-the-line
tax deduction for long term care insurance premiums would only apply
to tax-qualified long term care insurance plans.
There are also other differences
that consumers may wish to consider. Tax-qualified long term care plans
are designed to cover disabilities that are expected to last for a prolonged
period of time, and the IRS has set specific eligibility standards for
qualified benefits to be payable. The policyholder must either need
substantial assistance with two of at least five activities of daily
living (ADLs) for a period expected to last at least 90 days, or suffer
from severe cognitive impairment. That need must be certified by a licensed
health care practitioner. Long term care services must be in accordance
with a Plan of Care prescribed by a licensed health care practitioner,
and benefits can only be paid for qualified long term care services.
Under non-tax-qualified
policies, the insurance company may offer different benefit eligibility
triggers, including allowing eligibility for benefits upon a finding
of medical necessity. These less stringent triggers may provide access
to benefits more quickly than under tax-qualified plans. Premiums are
generally higher than for tax-qualified policies with equivalent benefit
levels, benefits may be taxable as income, and premiums may not be deductible
medical expenses.
The above tax-qualified vs. non tax qualified long term care insurance
policies was provided for your informational use by GE Capital's Long
Term Care Division, 2000.
|
Because of old age, mental or physical illness,
or injury, some people find themselves in need of help with
eating, bathing, dressing, and other physical activities. Long-term
care insurance can help pay for such care in the future. To
help protect your financial independence, as you grow older,
many Long Term Care Insurance providers have plans that offer
comprehensive benefits as well as a proven track record of claims
payments and financial stability. You should review all your
options carefully. |
 
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Prescription Drug Assistance
Programs
Pharmaceutical companies offer medication
assistance programs to help uninsured and indigent patients obtain needed
prescription drugs. Program eligibility criteria differs from company
to drug company, but most all of them, as part of their philanthropic
efforts, want "no patient in need to do without".
Seniors who feel the financial pinch
of filling doctor-prescribed medications should:
- Speak with their pharmacist.
Pharmacists have access to eligibility
criteria for each specific medication. They also have access to
the Directory of Prescription Drug
Patient Assistance Programs, as do you. Forty-nine manufacturer's
are represented regarding their offers of medications to physicians
whose patients cannot afford to buy the meds they need.
- Contact the drug manufacturer through
their websites
- Inquire of social workers and health
care providers for help
To qualify for free or reduced price prescription
medications patients must meet specific financial criteria and be prepared
to fill out paper work for each specific medication. Here is where a health
care professional can help.
- Some companies require that patients
have no third party payer assistance.
- Some programs provide intervention
with Medigap or HMO insurance companies to identify billing problems
and work to resolve claim denials.
- Some outline specific payment limitation
programs for expensive and long-term medications for the indigent.
- Patients may not be eligible if they
have any prescription drug insurance coverage, or may be required
to pay a nominal pre-determined shipping fee to receive "free" prescriptions.
- Some assistance programs provide a
card that can be presented at the pharmacy for medication refills.
Enrollment is not indefinite and most programs require periodic re-application.
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Auto Insurance
Here are some tips to help the senior drivers that are increasingly
staying in the driver's seat. Of course, like many life senior services,
the correct auto insurance is a must.
Auto Insurance Discounts for Mature Drivers
An accident is sometimes the first indication that an elderly person
should cease driving. It is hard for senior drivers to give up their
independence. Drivers over 75 have one of the highest rates of fatal
daytime accidents. Many times with Seniors, driving skills have impaired
over time.
Hence senior drivers should be proactive in keeping their driving skills
up. In many states, auto insurance discount are available in many states
for mature drivers who have taken an approved senior driver safety course.
Check to see if such a discount is available when you get a auto insurance
quote. Be sure you check the eligibility rules for the auto insurance
discount. AARP
offers a Driver Safety Program, mature driving courses through
local AARP chapters. Many insurance companies offer subscriber discounts
with proof of course completion. Information on local offerings may
be obtained through local AARP chapters.
Automobile Design
While the auto design features are important to all drivers, there
may be special considerations for seniors. These include: movement freedom,
high roadway visibility, and any unique physical limits. Careful attention
to the following parameters can assure a better driving experience.
1. Display panel visibility
2. Fully adjustable seats
3. Easy to use restraint devices (seat belts and such)
4. Lightweight doors for ease of handling
5. Unobstructed view of road and peripheral areas
Specific Physical Conditions
Many physical conditions and medications can have an adverse impact on
driving.
Seniors should be aware of the potential reactions to medicine that might
make driving difficult. Your doctor is your best place to gain such insight.
Several health elated conditions have been toed to automobile accidents
and injuries. These include: vision problems, joint inflammation, neurological
disorders, diabetes, foot problems and falling episodes.
Driving courses for Seniors are offered by many states to get informed
about potential problems and to renew safe driving techniques.
Getting the Correct Auto Insurance
Want to save money? Here are nine suggestions to help you save on your
auto insurance policies. It all starts with an auto insurance quote.
- Comparison shop.
Use consumer auto insurance information provided from your state's
insurance department. Visit the National
Association of Insurance Commissioners web site to locate
where to find your state's auto insurance information.
- Consider higher deductibles when getting your auto insurance quote
- Buy a "low-profile" car.
Check the Highway
Loss Data Institute for those cars that are stolen the least
and have the lowest repair cost.
- Drop collision and/or comprehensive coverage on older cars.
- Ask about discounts for antilock brakes, air bags and other safety
features
- Check your credit history and correct inaccuracies.
- Take advantage of low-mileage discounts.
- Check on group insurance and corporate discounts.
For example American Automobile Association (AAA) members can
save significant money on auto insurance.
- Ask about other discounts when you get your auto insurance quote.
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Travel Insurance
Page two of your passport says:
"HEALTH INSURANCE. Persons considering foreign travel should determine
what health insurance coverage, if any, they require while outside the
United States. Medicare does not cover health care costs outside the
United States and its territories, except under limited circumstances
in Canada and Mexico." Government sponsored health programs such as
Medicare almost never cover care received in a foreign country. Employer-sponsored
plans often limit overseas coverage to emergency care only. Emergency
medical evacuation is almost never covered. You might want to check
with your home health policy before you travel, and before you buy travel
insurance. Obtaining healthcare in some parts of the world can be tricky.
Some hospitals won't provide any treatment--or won't allow a patient
to be discharged--until the hospital has received a guarantee of payment.
Such guarantees are commonly provided by travel insurers, in conjunction
with assistance providers, but rarely by other insurers or managed care
plans. This means you'll have to pay in advance. If using a credit card,
the hospital must accept foreign credit cards and your card must have
a sufficient credit limit. In addition, traveling from your foreign
vacation spot--for a place with higher quality medical care or to return
home where your regular insurance is accepted--may be difficult. Medical
evacuations are tricky to arrange and all air ambulance providers are
not equal. Worse, local authorities may have financial ties to certain
evacuation companies. Travel health insurance may be purchased with
three components:
- Medical Assistance Benefit,Supplemental
health/accident insurance
- Medical Evacuation
- Trip Cancellation Insurance
Most travel insurance products offer all
three or two of the three.
A medical assistance benefit gives you 24/7/365 access to a company
that will arrange an evacuation for you with a creditable evacuation
company--or, through their medical personnel, can help assure that you're
getting appropriate treatment locally. They can provide the guarantees
needed for hospital discharge and could also help with other travel
related problems: i.e. legal troubles, lost passports or credit cards.
Supplemental health/accident insurance generally pays for doctor and
hospital bills, and sometimes dental care and medications. Depending
on when travel insurance is purchased, medical problems from preexisting
conditions may also be covered.
Medical Evacuation can be expensive (as much as $50,000 or more from
a remote location). In addition to the coverage, you'll want assistance
arranging an evacuation.
Trip cancellation/interruption. These coverages protect you financially
in the event you have to cancel or interrupt your trip for medical reasons.
For example: you purchase a $5,000 cruise but can't take it because
of personal illness--or illness in the family. Depending on when you
cancel, a significant portion of the $5,000 may be non-refundable. This
type of insurance will reimburse you.
Information provided by Eliot C. Heher, M.D. and HTH
Worldwide
1.888.243.2358
HTH
Worldwide offers trip cancellation, evacuation and supplemental
health/accident coveragge. HTH Worldwide provides these insurance
services along with complimentary global health and security
information for travelers. If bought within the regulated time
frame, trip cancellation due to pre-existing conditions is covered.
HTH supplemental health plans can be bought on an Annual/Multi
trip basis and have no pre-existing condition exclusion. |
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Additional Resources
Links to Other Insurance
Resources
Legal Disclaimer
All information in Insurance For Seniors Page, including
articles, forms, documents, videos and FAQs, are for educational purposes
and may not fit your specific situation. Due to the intense personal
nature of any insurance issue, it is suggested that you consult with
appropriate financial advisor to ensure your issues are resolved to
your satisfaction.
The insurance information links provided above are for a third party,
and is not endorsed by, supported by, or affiliated with Seniorresource.com.
Seniorresource.com: Insurance Information Page makes no representations
concerning the content of the third party information. |
