They pay fixed daily amounts toward the costs. They let you decide how much protection to buy and when to buy it. Before buying a long-term care policy, you must decide on the benefit level. A policy's premiums should not exceed 7 percent of your annual income. Recently, there have been several changes in long-term care insurance.
Many policies now protect against inflation and loss of benefits due to policy lapses.
Other plans allow individuals to customize benefits to meet their needs when care becomes necessary. A new law, the Health Insurance Portability and Accountability Act of 1996, provides tax incentives for long-term care insurance. According to the law, expenses not reimbursed for qualified long-term care services will be tax deductible under the medical expense deduction provision of the Internal Revenue Code, to the extent that all deductible medical care expenses exceed 7.5 percent of adjusted gross income. Premiums for qualified long-term care policies, up to a specified limit that are based on age, will also be treated as medical care expenses. Also, benefits received from a qualified long-term care policy may be excluded from income, subject to certain limitations.