Buying individual long-term care insurance is getting more difficult -- yet another retirement-planning handicap.
Prudential has joined the list of major insurers that have dropped their business. Besides Prudential, these include MetLife and Unum Group, which have eliminated some group policies. All say the cost of offering this retirement protection is too high.
Large long-term care insurers still in the business of selling insurance to individuals include Genworth and John Hancock.
In the meantime, the Internal Revenue Service has increased deductibility levels for long-term care insurance policies purchased in 2012. If you run a small business -- even one that you or you and your spouse operate part time -- long-term care can be a significant tax deduction. Individual taxpayers can treat premiums paid for tax-qualified long-term care insurance for themselves, their spouse or any tax dependents (such as parents) as a personal medical expense. How much you can deduct in either case depends on your age at the end of the tax year:
- 40 or less, $350.
- Older than 40 but younger than 50, $660.
- Older than 50 but younger than 60, $1,310.
- Older than 60 but younger than 70, $3,500.
- Older than 70, $4,370.
Many states also offer individuals and businesses deductions for long-term care, says Jesse Stone, director of the American Association for Long Term Care Insurance, a trade association.
Here are a couple of tips from Sloan for getting the most tax advantages from buying long-term care insurance:
- Some long-term care insurers offer "shared care" policies where two people share one pool of benefits. This may be used to maximize the eligible tax deductibility when there is a difference in ages between the spouses.
- Long-term care insurance premiums may be paid from a health savings account up to the limits shown above.
- In a sole-proprietor or a partnership situation, the owner/partner who has a spouse who is a true employee can deduct the actual (full) premium for that spouse's policy. If that spouse's policy had a shared benefit rider, that would be included in the deductible premium amount (the actual total premium is deductible).