Should I have long-term care insurance?

As an elder law attorney, much of my practice is legally protecting assets of those in, or headed to a nursing home or who need at-home services.  Also, part of my practice is helping clients in advance who are young and healthy enough to still obtain long-term care insurance. I have reviewed long-term care insurance policies or applications for clients many times.  The main concern of clients is to protect family from the burden of their care and financial hardships that could result from long-term care, whether at home or in a facility.

In the past, the main type of long-term care insurance that provided a daily or monthly benefit after a waiting period and for a certain number of years (some older policies are unlimited) was a “use it or lose it” policy.  If paid in and never needed then all of the premiums paid in would be gone and many clients felt this money was wasted.

As a way to counter that, so-called hybrid policies have become popular. These policies combine long-term care insurance with permanent life insurance policies such as universal life insurance (which, like whole life insurance) includes a savings-investment component that builds up over time).  In the hybrid scenario, a policyholder would withdraw funds from the policy when they are needed for long-term care, and the insurance company pays for care when those funds run out. And if the policyholder dies without having needed expensive long-term care, the heirs receive a death benefit — therefore the premiums paid into the policy are not “wasted.”  Also, many of these policies allow a return of the premiums paid in.  Typically, a surrender charge the first 10 years is imposed.

I recommend you get quotes on several different types of policies and get comfortable with the costs, benefits and disadvantages. It is hard to make a decision without seeing real numbers and comparing the different types of insurance. Your health could also play a role in your decision — the underwriting for hybrid policies is usually a little easier, so your health may push you toward a hybrid policy.

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