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Long-term Care Insurance: Still Worth Buying?

Every year it seems another company drops long-term care insurance from its portfolio of products. Companies from MetLife to Genworth have either reduced benefits or eliminated the policies altogether. This begs the question, is it still worth having? Some experts say no. On one hand, the certainty of having a set dollar value available for covering the cost of nursing home care can be comforting. On the other hand, the premiums are not.

Rising Premiums are Unpredictable

Most sources agree that the majority of those age 65 and older will ultimately require nursing home care at some point in their lives. Average nursing home costs are skyrocketing to over $83,000 per year. With this fact in mind, it seems that investing in the possibility of needing care is a fairly safe bet. Still, with premiums rising out of control, that bet is pretty tough to accept. Some have seen premiums go from just $1,500 per year in 2004 to well over $5,000 per year now. Some seniors see these premiums rise every year, regardless of health. Therefore, this makes one wonder if there really is any certainty to purchasing these policies.

Medicaid: The biggest single payer system

Today, Medicaid has become the most popular means of financing long-term care. With the monthly cost of nursing home care going up, even more affluent families are finding that nursing home expenses can eat up a family’s net worth in just a few short years. Therefore, more and more Americans are turning to advance-planning to secure Medicaid eligibility. Elder law attorneys in New York are constantly looking for ways to help families wisely spend-down their assets and transfer ownership of property long before there is a need for nursing home care. The current look-back period is 5 years. This means that transfers occurring within the 5 years directly preceding application for Medicaid are considered as income for the purpose of determining a person’s ability to qualify.

Responsible Use of Long-term Care Policies

The regulations are complex; the rules often are not intuitive. This is why it is important that those considering Medicaid planning consult an elder law attorney early. Long-term care insurance may still be a viable option if purchased early and provided the rates can be locked in for a specific duration.

For instance, premiums for a 40-year-old, healthy male can be quite reasonable. If the rates can be locked in for 25 years, then that person is covered until 65. After that time, renewing the policy may be very expensive – so much that it may not be worth renewing. Further, it is doubtful many companies will even offer these policies 20 years from now. Therefore, it may be wise to treat these policies as a short-term solution in case of an unforeseen event earlier in life. This buys a person time to prepare and engage advance-planning techniques before nursing home care is needed.

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