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Long Term Care Insurance Pros and Cons

The high costs of long term care can wipe out your nest egg in a hurry.

Long term care insurance can help protect your retirement assets.  But long term care insurance is not for everybody.  Let's take a look at the pros and the cons of long term care insurance.

The Pros of Long Term Care Insurance

Benefit flexibility

Long term care insurance can be custom tailored to fit your specific needs.  You may buy as much or as little coverage as you need. You may select a wide range of long term care insurance inflation protection options to keep up with rising health care inflation.

Long term care insurance policies also include Alternate Plan of Care language.  This contractual provision will provide long term care benefits even if future acceptable care delivery methods aren't specifically mentioned in your policy.

Tax-free benefits and tax deductible long term care insurance premiums

Long term care insurance benefits are tax free.  You do not have to withdraw money from taxable retirement accounts to pay for your long term care.

Long term care insurance premiums are tax-deductible, subject to certain limitations.

Affordable premiums

The average long term care insurance premium in 2020 is approximately $2845 /year per person.  The annual cost of care today is over $102,000 per person, and is projected to be $250,000 per year in 25 years.  Your cumulative premium outlay over 25 years is less than what 1 year of receiving long term care costs in today's dollars.

Your family can be the care managers rather than the caregivers

Children often have relocated to different cities; many families today are dual income.  While most children can be expected to want to take care of their parents, it just may not be feasible economically or physically.  Having long term care insurance relieves the added burden of caregiving.  Instead the family can manage the caregiving duties, while the care professionals can provide the needed care.

The Cons of Long Term Care Insurance

Long term care insurance premiums are not guaranteed and may be increased.

There have been many stories of long term care insurance rates being hiked by long term care insurance companies.  Is this a reason to possibly not take steps to plan for your future possible long term care needs?  Maybe.  But probably not.

Typically the rate increases are on older blocks of long term care business, often long term care insurance policies sold over 10 years ago. These rate increases were requested because the older policies were underpriced, and the insurance companies grossly underestimated the persistancy of the product.  (Consumers rarely lapse their long term care policies, and long term care insurance companies experienced higher claims than projected).

Understandably, many consumers are concerned about the potential to have a rate increase.  It is important when designing your policy benefits to account for the potential of a future rate increase. Keep in mind an insurance company can not raise your rate as an individual because you have had a claim.  The insurance company must raise rates for all policyholders it sold your policy to.  Also, rate increases are rare and may not occur for 10 years or more.  If it occurs, it may be an increase of 10% or 20%.  We encourage our clients prior to applying for coverage to be sure that a future rate increase will not derail the overall benefits of a sound long term care plan. 

Of course, if long term care insurance rate increases are a concern a hybrid policy such as Lincoln Moneyguard offers guaranteed benefits with no risk of a rate increase.

Long term care insurance benefits may never be needed.

Sure, you may die and never need to receive a day of long term care.  Well, that would be money thrown down the drain, wouldn't it?

Long term care insurance is similar to carrying auto insurance or homeowner's insurance.  If your house does not get flooded, or if you are not involved in a car accident, would you ask Allstate or State Farm to refund your premium?  Of course, not..

The last time I looked at statistics, you are more likely to need long term care than to have your house get destroyed by fire or weather.  65% of us will need some long term care.

Of course, if you are concerned with paying a premium and never receiving any long term care insurance benefits simply consider including a long term Return of Premium as an option to include in your long term care insurance policy.

The long term care insurance company may "go under"

How would you feel if you paid for long term care insurance for 20-30 years and not have the long term care insurance company around when you need it?

We would not feel good, either.

That's why we storngly believe financial strength and stabilty of the long term care insurance company is a critical factor to consider.  It is important to only consider the best long term care insurance companies with assets in the billions and at least an "A" rating from AM Best. We believe that many of the long term care insurance companies we work with: Lincoln Financial Group, OneAmerica, Mutual of Omaha, National Guardian, Nationwide, Securian, Transamerica, Pacific Life, and others...are some of the strongest financial institutions in North America, and do not present any risk whatsover.

Current Financial Ratings of the Best Long Term Care Insurance Companies 

Is long term care planning right for you?

Before weighing the pros and cons of long term care insurance policies, we suggest you speak with an independent long term care insurance specialist such as LTC Partner.  Only a true independent long term care insurance agency can best help you navigate though your many LTC options.

We definitely understand that long term care insurance is not for everybody, and there is a lot of information to consider.

Please call us anytime to review your free long term care insurance quotes, or to discuss any long term care questions or concerns you have.  You may reach LTC Partner toll free at 1-800-891-5824 or you may contact us with any questions.  We will respond to your needs shortly.

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