Critter Corner: Should I Get Long-Term Care Insurance?

Dear Baxter,

My neighbor is an insurance agent who keeps bothering me about long-term care insurance. I try to avoid her, but lately it hasn’t been working. To help me make an educated decision, can you provide some reasons I can add to my pros and cons list?

Thanks!

Lee Vamealone

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Dear Lee,

With long-term care costs generally rising faster than inflation, many people, such as you, are looking into whether long-term care insurance is right for them. While there’s definitely a benefit for some people to purchasing long-term care insurance, there are certain issues to consider before you buy, including some very important facts about how long-term care insurance interacts with Medicaid.

On a positive note, when it comes to LTC insurance, there may be some tax deductibility for the insurance premiums you pay as an individual (if you itemize deductions) to the extent that the premiums paid exceed 7.5% of adjusted gross income. Many states also offer tax incentives (credits/deductions) to encourage the purchase of LTC insurance.

The biggest disadvantage to long-term care insurance is that your premiums might increase drastically as you get older, despite the fact that the company told you that you were “locking in” your premium at the time you purchased the policy. This is because the insurance company can go back to the State Bureau of Insurance and request premium increases across the board, which all long-term care insurance companies have done over the years because of greater-than expected claims. For many people who purchased long-term care insurance in the past, they found that premiums became so high that they ended up having to cancel their policies in later years, losing all the money already put into the policy. Or, they were forced to accept drastically reduced benefits in order to keep their premium from increasing.

Also, in most cases, when long-term care benefits are actually paid, they are usually far below the actual cost of care. For many of the longest-term residents, benefits were used up before the nursing facility stay ended. For more details, please read our blog post, Long-Term Care Insurance: Yes or No?

So, if you are considering long-term care insurance, I suggest that you first look at each policy very closely because each one is written differently. Also, look closely at the insurer’s claims payment history and whether they have been increasing premiums for existing policy holders. If you have done your research and decide that long-term care insurance might be right for you and your family, you should first meet with an experienced Elder Law Attorney such as me in order to understand all of your options, because there are dozens of long-term care asset protection strategies other than long-term care insurance. For example, the Living Trust Plus™ Medicaid Asset Protection Trust is just one of many long-term care asset protection strategies.

Hope this helps!

Baxter

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