According to a recent article in the Wall Street Journal, the cost of long-term care insurance will increase and the approval processes will become more difficult as more major insurance companies cease offering these policies. Insurance companies have cited the uncertainty surrounding future claims and low interest rates as the most common reasons for discontinuing the sale of long-term care policies.

Medicare and major medical policies cover nursing home care only on a short-term basis. Medicaid will pay for long-term care; however, eligibility for Medicaid is limited to people with limited assets. Therefore, most people will either pay for nursing home care themselves, divest themselves of assets in order to achieve eligibility for Medicaid before the need for nursing home care arises, or purchase long-term care insurance.

Ideally, a long-term care policy should have an unlimited duration, a large daily payment rate and a high inflation protection rider. The age of the applicant and the policy limits are two of the critical factors that determine the amount of the long-term care premium. For example, the more generous the benefits or the older the applicant is when applying, the higher the annual premium will be. Moreover, a potential applicant who waits too long to apply risks becoming uninsurable.

The cost of nursing home care continues to rise steadily each year. Instead of relying on long-term care insurance to pay the total cost of nursing home care, another option is to purchase a policy with fewer benefits that offsets only a portion of the total cost of care. This allows individuals to preserve their personal assets and, and at the same time, it increases the possibility that individuals will have assets to leave to their heirs. While the policy benefit limits would be lower, so would the policy premiums. There are also hybrid products available that combine life insurance with long-term care insurance. These types of policies sometimes require a larger up-front premium but they guarantee a payment to heirs if little or no long-term care is utilized.

As with all insurance, it is always wise to shop for long term care insurance through reputable agents and to compare the cost of the policies with several companies. It is also important to consider purchasing fewer benefits in order to reduce the premium payments.

When planning estates, particularly for clients age 50 and older, it is critical to weigh the advantages of long-term care insurance versus the impact of privately paying for such care.

Published on Dec 20th, 2012. © Copyright 2012 Hinkle, Fingles & Prior, P.C., Attorneys at Law. All rights reserved.
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