Historically individuals have purchased Long-Term Care policies to cover the bulk of their retirement expenses but in recent years, Long-Term Care coverage has become increasingly less affordable. According to an article published in the Chicago Tribune, this has NOT gone unnoticed by insurance carriers. Consequentially, many carriers have developed new, more affordable products designed to make retirement planning easier and less financially burdensome.
“…many carriers have developed new, more affordable products designed to make retirement planning easier and less financially burdensome.”
Single women, who statistically live longer than men, pay 50% higher Long-Term Care rates than that of single men. For single women, a great way to reduce the cost of Long-Term Care coverage is to purchase a Life Insurance policy with a Long-Term Care rider. Adding a Long-Term Care rider to a Life Insurance policy is generally free and although it may reduce the death benefits, rates won’t rise over time.
“…a great way to reduce the cost of Long-Term Care coverage is to purchase a Life Insurance policy with a Long-Term Care rider.”
For couples, purchasing a couples policy or shared-benefit policy can drastically reduce Long-Term Care costs. Rather than purchasing two separate policies, a husband and wife may purchase one Long-Term Care policy, allowing them to share in the benefits of a single Long-Term Care policy.
“…a husband and wife may purchase one Long-Term Care policy, allowing them to share in the benefits of a single Long-Term Care policy.”
By Kimberly Lankford
Kiplinger’s Money Power
3:30 a.m. CST, November 5, 2013
Until recently, people bought long-term-care policies to cover 100 percent of the cost of care. But rates for new policies have shot up and it has become a lot more difficult to qualify for coverage if you have health issues. Fortunately, insurers are offering new options that shift more risk to you but make policies less costly.
— His and hers policies. Several major insurers have switched from unisex to gender-differentiated pricing. Genworth, the largest long-term-care insurer, announced the change in late 2012, and John Hancock, Transamerica and Mutual of Omaha quickly followed suit.
In many cases, single women — who tend to live longer than men and are more likely to need care — now pay about 50 percent more than single men, says Claude Thau, a long-term-care insurance consultant in Overland Park, Kan. But most insurers continue to offer discounts for couples of about 30 percent, says Thau. For example, for healthy 55-year-olds buying a Genworth policy with a three-year benefit period and a $150 daily benefit, plus 5-percent compound inflation protection, the cost is $2,190 a year for a single man and $2,966 for a single woman. But the price drops to $1,854 each if they buy as a couple. Couples can also hedge their bets with a shared-benefit policy. Instead of two separate benefit periods, you share a benefit pool — three years each becomes a pool of six years that can be split between the spouses.
If you’re a single woman, consider a policy that combines long-term-care and life insurance. With a combo policy, rates won’t go up, and either you or your heirs are guaranteed a payout. For example, a 60-year-old woman who invests $100,000 in Lincoln Financial’s MoneyGuard policy could get $6,627 in monthly long-term-care benefits for six years — totaling $477,144. If she dies before needing care, her heirs will get a death benefit of $159,048. (Money she uses for long-term care is subtracted from the death benefit.)
— Inflation protection for less. In the past, most policies automatically increased benefits by 5 percent compounded per year. But policies with 3-percent or CPI-adjusted inflation protection, which trims premiums, have become more popular. And some insurers are offering policies with future purchase options, which cost less than traditional inflation-adjusted policies to start out but don’t increase benefits automatically. When choosing an inflation option, don’t simply compare premiums. Calculate how much the pool of benefits will grow to by the time you’re likely to need care.
(Kimberly Lankford is a contributing editor to Kiplinger’s Personal Finance magazine and the author of Ask Kim for Money Smart Solutions (Kaplan, $18.95). Send your questions and comments to firstname.lastname@example.org. And for more on this and similar money topics, visit http://www.Kiplinger.com.)
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