If you're worried about nursing-home costs draining your resources, consider investing some of your retirement savings in an annuity. That assures you and/or a surviving spouse or partner a lifetime source of income that won’t be forfeited to the nursing home.
You may lower premium costs by eliminating all the expensive bells and whistles while keeping the inflation kicker. Lowering the daily reimbursement rate and increasing the waiting period until benefits kick in also lowers premiums.
If you can only afford to insure one person, women are more likely to spend extended periods in nursing homes.
Factor-in the possibility that your LTC premium will increase. Many policyholders have had to endure premium increases of 50 percent or more in a single year. Those burdened by increasing premiums can pay the higher cost, pay the original premium by accepting scaled-back coverage, or let the policy lapse.
While you’re in the market for a new policy, ask the agent or the insurance company whether or not premiums on policies they’ve previously issued have gone up. If premium payments have increased, find out how much.
Instead of LTC, you or your parents could also think about continuing-care communities. These communities provide all levels of care—independent living, assisted living, and nursing-home care. By choosing a continuing-care community, you may eliminate the need for an LTC policy.
When Should You Buy an LTC Policy?
Keep in mind that the annual premiums for LTC coverage are much higher if you wait until your 60s or later to take out a policy. Few experts recommend purchasing coverage before age 50. After age 70, premiums may become prohibitively expensive.
While you’ll pay lower premiums if you buy a policy at a younger age, keep in mind that you’re likely to pay a long time before collecting benefits, if ever. The average age at which people enter nursing homes is 83.
On the other hand, a compelling argument for purchasing a policy at a younger age is that health issues could render you uninsurable at an older age. Buy an LTC policy at a younger age if any of the following apply:
- If your health is deteriorating
- If you engage in high-risk activities
- If your family has a history of early disability
If your fear of the unexpected is robbing you of sleep, you may want to obtain coverage now rather than waiting. Too, decisions of equal importance are whether you can afford the premiums or are wealthy enough to self-insure.
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