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What Happens If I Can't Afford My Long-Term Care Insurance Policy Years from Now?

Quick Answer

Most people purchase LTC Insurance in their 50s, some even in their 40s. Premiums are lower at younger ages, and your health is better - giving you more options. But what happens if you can no longer afford your policy? There are options.
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Detailed Answer

Today more people understand the need to plan for future declining health and aging. As we get older, we experience a decline in our health, body, and mind. We experience mobility problems and need help with our daily living activities. Some people will develop dementia and require supervision. When this happens, we need long-term health care, and the costs are expensive and continue to grow every year.

Since health insurance, including Medicare and supplements, will not pay for most of these costs, it means the responsibility for long-term health care is ours. 

Don't count on Medicaid unless you have little or no income and assets. Family caregivers? No, your adult children have careers and their families; besides, they are usually untrained and unprepared for the role when forced into becoming caregivers because of lack of planning. 

So you buy Long-Term Care Insurance. Good move for many people, but can you afford the premium in twenty or thirty years? What happens if the premium is no longer affordable?

If you stop paying your premium, you generally lose your benefits. 

You could buy a nonforfeiture rider at extra cost. If you purchase this type of rider, you will have some limited long-term care benefits if you lapse your policy.

However, few people lapse their policies, and few people purchase this rider. 

Here are some tips:

• You can always reduce your benefits, reducing your premium.

Some companies make reducing benefits easier, but every company allows you to do so. First, call your agent or the insurance company to determine what your current benefits have risen to. Most people purchase inflation benefits, so your benefits will be higher than when you purchased your coverage. 

Check the current long-term health care costs where you live on LTC NEWS. Concentrate on the costs of in-home care and assisted living - the type of care most people require. 

You can lower the monthly or daily benefit, the benefit pool (benefit period), and even lower the inflation rate. Be careful; if you have a Partnership Long-Term Care Insurance policy, don't void the partnership benefit by taking off the required inflation benefit. 

A lower benefit is better than no benefit!

• Don't buy more benefits than what you need. 

You design your policy benefits, but some insurance agents or financial advisors will recommend benefits to pay for most or all of the cost of nursing homes. Few people go to nursing homes anymore with so many other available care options (in-home care, adult day care, and assisted living). 

Most Long-Term Care Insurance specialists recommend benefits that will easily pay for in-home care, adult day care, and assisted living. Nursing home care is the most expensive but the least used type of care service. 

The LTC NEWS Cost of Care Calculator shows you the current and future cost of long-term care services where you live. 

Remember, if you move into a facility, you probably will sell your home. Those expenses disappear—the same for moving into assisted living. Couples can move into assisted living together, while not the case for a nursing home. However, most people in nursing homes are women, and the husband usually has passed away by that time.

Design your Long-Term Care Insurance policy for the lower costs of home health care, adult day care, and assisted living. Your premium will be much lower and most likely easily affordable in the decades to come. 

• Buy a nonforfeiture rider.

If you are concerned about future affordability, you could purchase a nonforfeiture rider. If you no longer can afford your policy, you will have some limited long-term care benefits available.

• Buy a limited pay policy.

Some insurance companies allow you to pay one single premium or a limited amount of premiums and have a fully paid policy. If you know you can afford the higher premiums, and you are concerned about future affordability, this might be an option to consider. 

• Buy a hybrid policy.

There are several ways a hybrid policy can help you avoid the future problem of affordability. Hybrid policies can be paid with ongoing guaranteed premiums, limited pay premiums, or with a single premium. 

If you have already paid the premium in advance, you never have to worry about paying premiums in the future. These types of policies also have cash surrender value available.

Be careful, however. Hybrid policies are expensive and do not include partnership benefits; however, they do include death benefits. If you are concerned about future affordability, do you really want to spend more money today to solve the problem of long-term care?

Discuss your concerns with a qualified Long-Term Care Insurance specialist. You may find out your concerns about future affordability can be addressed by designing an appropriate policy in the first place. 

Life always includes many 'what ifs,' but don't allow fear to prevent you from smart planning. There is a good chance you will need long-term health care, and those costs are expensive. Having some benefits in place will protect your family and finances from the consequences of declining health and aging.

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