Insurance come-on arrived in disguise

Q: I'm enclosing a letter I received from the government about long-term care insurance. I know the sender wants us to buy this so the government won't have to cover the expense, but why are my tax dollars going to pay for promotional letters encouraging us to buy this?

I contacted the Department of Health and Human Services, and the person I spoke with denied that the department sent this. Can you find out whether this is from that department? Am I under any obligation to respond?

A friend received the same letter, and he is under the impression that the government wants us to buy it so much that it now offers a tax deduction for the premiums. Is that true? What do you think about this type of coverage, and what should one look for?

A: The letter and the return envelope certainly have an official look, but if you take time to read the fine print, you will see that this is just a marketing tool from an insurance provider.

If you respond, you are giving the company permission to contact you concerning a quote on long-term care insurance. The letter refers to a report distributed by the U.S. Department of Health and Human Services through its "Own Your Future" campaign. The insurance company will send you a free copy of the long-term care planning kit if you provide personal information and permit agents to contact you.

'I wasn't impressed'

You can get the kit by downloading it or ordering it from www.longtermcare.gov/ ltc/main_site/planning_ltc/campaign/kit/ index.aspx. I wasn't that impressed.

In my opinion, a better guide to long-term care planning can be found at www.ncdhhs.gov/aging/insur.htm.

The Senior Health Insurance Information Program, or SHIIP, offers solid advice and suggests questions to ask when considering long-term care insurance. That includes the tip that everyone should receive a shoppers' guide to long-term care insurance, published by the National Association of Insurance Commissioners, which can be reached through the Web site above or by calling (800) 443-9354.

The tax deduction sounds good, but unless you are a small business owner, self-employed or have a lot of uncovered medical expenses, it might be a moot point.

For most taxpayers, if uncovered medical expenses combined with the long-term care insurance premium exceed 7.5 percent of adjusted gross income, the taxpayer can take the following premium amounts as a miscellaneous deduction: if under age 41, $310; age 41 to 50, $1,150; age 51 to 60, $1,150; age 61 to 70, $3,080; and over 70, $3,850.

Benefits paid are tax free if you have an indemnity plan and up to $270 a day is tax free if you have a per diem plan.

Long-term care in a nursing facility or at home can be very expensive.

The insurance is also rather expensive, but as with most insurance, if you need it, you are paying pennies on the dollar for the coverage.

On the other hand, if you don't need it, you have paid for protection you will never use. It's not much different from fire insurance on your house: You hope you never need to collect, but if you do, the premiums are well worth it.

According to National Center for Health statistics the length of a stay in a nursing home is less than a year for 77 percent of those admitted who are 65 to 74 years old. It's less than a year for 70 percent of those admitted who are between 75 to 84, and less than a year for 73 percent of those admitted at age 85 and over. The average length of stay was 272 days.

You could be one of the elderly who need care beyond the average, so the amount of coverage you purchase is a personal decision.

I like to use insurance to hedge my bets. I prefer to have high deductibles and minimal coverage so I can pay less in premiums, but I have some coverage to help out, if needed.

A bare-bones long-term care policy will cost you less in premium but more than likely won't begin to cover all of your costs if you need longer care than the average person.

Talk with an objective, fee-only financial adviser to discuss how this coverage fits into your financial plan.