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Have You Considered Long-Term Care Insurance?

By: Curtis M. Johnston, Vice President and Wealth Advisor at Girard, a Univest Wealth Division

Being at home for the last few months has allowed us the time to review our insurance costs and coverages. Many of us are missing long-term care (LTC) insurance in our insurance portfolio. LTC insurance policies are beneficial if an individual would need nursing home or 'at-home' care and cannot afford to pay for it on their own, which most people are unable to do. A retirement nest egg or savings could be depleted very quickly if LTC is needed for an extended period. In some instances, a spouse is left with very little savings if their partner would need care and they have not purchased an LTC insurance policy. 

So why don’t more people buy LTC insurance? A significant reason for this is the cost. We have seen the LTC policies our loved ones purchased years ago sustain considerable premium increases. The potential of future premium increases or the possibility of paying for something we may never need are justifications of why many of us do not purchase LTC insurance. Years after policies were purchased, insurance companies have offered the contract holders a choice to either pay the increased premium or reduce the benefits. This offer has led some contract holders to remove inflation benefits from their policies because they can no longer afford the premium.

A potential alternative for some people may be a hybrid long-term care policy. With a hybrid LTC policy, a rider is added to a permanent life insurance policy (for an additional cost) which allows someone to use the death benefit to pay for monthly LTC expenses. The monthly amount paid for LTC expenses is set as a percentage of the death benefit when the policy is issued. For example, if you were to take out a $250,000 permanent life insurance policy and pick a 2% benefit, it would pay $5,000/month. If you were to pick a 4% benefit, it would pay $10,000/month for the same policy. The monthly benefit would pay until the entire death benefit is exhausted and the policy would then terminate with no additional benefits to be paid. If an individual were to pass away before using the whole $250,000, the remaining amount would distribute like typical life insurance. This option may be an interesting alternative for some people because it can help defray the cost of long-term care expenses, but if it turns out that they don't need LTC coverage, their heirs will get the death benefit.

If you have any questions about how long-term care insurance or a hybrid LTC policy could work within your financial plan, please reach out to your Girard Wealth Advisor. There are many variables to consider, including future anticipated length and cost of care and applicable underwriting by the issuing insurance carrier, and we can help when choosing a long-term care insurance plan because one size does not fit all.


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This article is for general informational purposes only and is not intended to provide legal, tax, accounting or financial advice. The information in this article, and any opinions expressed therein, do not constitute a recommendation or an offer to buy or sell any security or financial instrument. Viewers should consult with their financial and/or legal professionals before making any financial decisions.

Insurance products are obligations of the issuing insurance companies and any benefit payments or guarantees are based on the claims paying ability of the issuing insurance company. The purchase of insurance products are not a condition to any bank loan, product or service.