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long-term-care insurance

By Terry Savage on September 13, 2016 | Insurance

Thank you for your article discussing the sticker shock of the rise in premiums for long-term-care policies. The options you described in one company's plan of premiums rising as much as 126% are very similar to the notification I received at age 75 of a rise in premiums of 40%. Even though it represented a sizeable hit to my budget, my financial advisor and I both agreed that I should take the full continuation of the plan's offerings. It's gratifying to know that these increases are industry-wide and not simply a hit to a certain plateau of seniors. However, my question has to do with the general thought on purchasing LTC insurance, that purchasing a policy early on, and especially from a company-sponsored group plan is the wisest choice. My sponsoring company offered the group plan early, which was later cancelled and replaced with another group plan which did not contain some important policy provisions. Now my current plan seems to have negated these traditional-thought reasons to buy the insurance early. In my analysis of options I did consult the Genworth tables and came to your same conclusion to keep full coverage. What I did not consider at the time was to learn the cost of dropping the plan entirely and pricing a new policy in the marketplace at my age. No option there I'm guessing. As a sidenote, my deceased husband paid in to his policy for many years, then died suddenly without ever using the policy.

Terry Says

OK, this is about the philosophy of owning LTC insurance.

  1.  If you're over 65, the odds are good that you will need some form of long term "custodial" care.  Probably not for more than 3 years, according to the averages.  Longer if Alzheimers' runs in your family.  And you'll have to pay for the first 90-100 days yourself in any case.  Now, do you feel lucky?  LTC could wipe out your savings quickly, leaving you in a state Medicaid-funded nursing home.  At least with LTC insurance you can "buy your way in" to a nicer facility~
  2. It USED to be smart to buy a policy earlier when you were healthier and premiums were lower -- presumably for the rest of your life.  Insurers couldn't raise YOUR premiums just because you got cancer or some other disease.  No one -- especially me-- figured they would have these huge increases for ALL policyholders.  But they convinced insurance commissioners -- state by state -- that they'd go out of business if they didn't raise premiums on everyone.  They goofed -- priced policies too low in the first place.
  3. If you're younger, say in your fifties, there is a better way to purchase LTCI.  Do it through a "combo" life/LTC policy.  See my recent article on those in the archives at www.TerrySavage.com.   Here's a link.  That solves two problems.  If you make a lump sum deposit into the life policy with LTC rider, they can't raise your premium.  AND, if you don't use the LTC part of it, your named life insurance beneficiaries will get a payout.
On a personal note, I paid for policies for my parents for many years.  My mother passed away without using her policy.  But I spent the day  with my Dad this weekend.  He's 95, and in relatively good health, but frail.  Sure glad I bough LTC insurance for him! Don't give up your policy because of the rate increase;  adjust it!



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