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Pros and Cons of Long-Term Care Insurance

Frail seniorBecause of the high costs of long-term care, some people are considering long-term care insurance to pay these bills.  However, if you’re considering purchasing this insurance, you need to know that it is costly, (although not as expensive as self-insuring would be) very complex and not everyone will qualify.

Health care costs are sky-rocketing. For seniors or those who need help with some daily activities, the costs can easily run into thousands of dollars.  A 2015 cost of care survey from insurance company Genworth Financial estimated the national median cost of care for a home health aide to be almost $46,000 annually, while the national median cost for a private nursing room home is more than $91,000 annually.

It is money well spent to talk to an elder law attorney to see if these policies make financial sense. They can review a person’s assets and any other coverage they may have from Medicare, Medicaid and other state and federal programs that are designed to support the sick and elderly.

For those who don’t have many assets, an LTD policy may be too costly. These policies are less expensive for younger and healthier people. Policies are designed so the buyers purchase a set amount of benefits for a certain time period.

The premiums can go up dramatically as people age.  This is why someone purchasing a policy in their 40s, will spend less than someone in their 50s or 60s. With rising premiums, buyers must consider if they’ll have future assets to cover premium increases. Some policies have optional non-forfeiture riders that will protect what was already paid if a policyholder can no longer afford the premiums.

LTD policies require medical underwriting, and having pre-existing illnesses will increase the cost.  There are also many situations where a person won’t be eligible for coverage, including cognitive impairments such as dementia, Parkinson’s and Alzheimer’s.

LTD policies last as long as the money purchased by the policy is available, possibly three or four years. When the policies end, people need to use their other assets if they still need care. The policies typically start coverage when someone needs help with two or more daily activities, like bathing or dressing (after a waiting period).

Reference: Chicago Tribune (November 6, 2017) “Thinking of buying long-term care insurance? Consider these costs”

 

 

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