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Long-Term Care Insurance? Yay or Nay?

Long-Term Care Insurance? Yay or Nay?
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BY KITT WALSH

Boomers are at the age where everyone wants to sell us everything—particularly insurance. Though most of us have our health insurance locked in, we may not have long-term care insurance and Chicken Littles everywhere, in the guise of insurance salespeople, assure us the sky is going to fall and we better get covered while the getting’s good.

Just so you know, here are the three most common types of long-term care policies:

Reimbursement: The most common type of long term care policy, this one reimburses you for actual charges. If your policy covers you for $300 a day and your bill is $200 a day, you get reimbursed the $200 ad the additional $100 goes back into the pool.

Indemnity

With an indemnity policy, you get back everything your policy pays for. If you have a $300 per day policy and your bill is $200 per day, you still get $300 back. This type of policy is more expensive than the reimbrusement policy.

Partnership

These policies are part of a program that can protect your assets and lets you still qualify for Medicaid to receive those benefits if you are eligible. Policies and program vary by state, but each state requires a minimum benefit amount and benefit period.

So, which should you buy?

Maybe none, according to some financial experts.

Long-term care insurance has three big flaws (as opposed to hooking yourself up with something called a “longevity annuity” which pays out a fixed monthly sum when you hit a predetermined advanced age … say 80 years old.)

Long-term care policy companies can change horses in midstream. Sometimes the rate on these polices hike 45-80% and then what to do? Throw away the policy you have been paying into or submit to rate hikes basically with a gun pointed at you. In some places, this would be called highway robbery.

Long-term care policies only cover long-term care. What if some future president really does privatize Social Security and the economy tanks again, taking your private investment with it and you need help to pay your rent or utilities?

You or your family might have trouble getting the coverage. You haven’t reached the ripe age of 50+ without running into the doublespeak that is all too common with insurance companies, but what you may not know is that this phenomena may be worse in long-term care policies. It seems the industry is in trouble, with companies claiming they are paying out too much as people live longer. To combat that, conditions, such as strokes, are often not considered “chronic health problems” as long as evaluations of the patient reveal they can still do basic things for themselves, like walk to the bathroom. The fact the patient can no longer cook, read, open mail or even remember their name isn’t considered. Cherry picking of symptoms to avoid payment is becoming increasingly common as a way to avoid paying a claim and it is the last thing you want to worry about or want your family to have to deal with in the case of your incapacity.

Longevity annuities run the risk of you dying before you collect on them, it’s true, but the money is yours to do with as you will if you hit that ripe old age. ($100,000 invested at age 60 should merit you around $3,300 per month when you are 80.)

I am no financial advisor and you should look carefully at your own situation before deciding, but try to turn down the volume on those salespeople’s voices when they warn that, if you don’t buy long-term care insurance now, it will be unaffordable later. With age is supposed to come wisdom. Use some of yours to take care of your financial health in the long-term in a smart way.

 

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