They had the foresight to buy a long-term care policy 5-10 years ago. My first comment is: good for them. When you sit down and see what is the premium for long-term care at various ages, you quickly see that the younger you buy it, the better. That seems obvious, but I am here to tell you that the premium differences are extreme. Look at the prize-age 45, for example, and compare it to age 65, age at which most people even begin to think in the long term care.
However, (Arizona using as an example) 5-6 years ago household expenditure was about $ 120 per day. This works out to about $ 43,000 a year. Today, the average is $ 70000 a year.
Upon was aware of this, many people want to take the necessary measures to get their coverage more in line with current costs. When you start to look around, they discover two things
Because they are older, the premium is significantly higher. A lot of times, is so large that it is not even in affordable.
Looking similar coverage to old age and see a greater premium makes sense, but there is also another factor history. Over the past five years, long-term care premiums have increased about 40%. A lot of this had to do with the first insurance company in prices. The actuarial assumptions began using mathematical statistics for the general population. In many ways, this was a stab in the dark. But they had to start somewhere. As time was over, they found that the complaints were much higher than their initial projections. After an insurance company has enough books on the business so that it can be statistically relevant, they start using real experience.
So people wanting to bump up its coverage are generally looking for outside-the-chart premiums - both because they are older and insurance companies have changed their pricing.
But depending on the situation, there may be a solution
Many people have CDs and annuities. In most cases, the CD is considered " difficult times " or " emergency " money. The annuities are " non-qualified deferred annuities ". Most of the time, they are just sitting there, like the CD, but with a longer-term holding in mind. Over 90% of people die holding the annuity " as " because they are never converted to some sort of a income.
There are few insurance companies that will allow the transfer of a CD or an annuity in a particular combination annuity / long-term care product.
It works as an annuity in that it grows on a tax deferred - fixed annual interest rate. However, if the person never has a long-term care needs of any type (adult day care, respite care, hospice care, assisted living or a full blown home) withdrawals can be made from the annuity. Generally funds can be withdrawn over a period of three years. Keep this in three years time your mind, it becomes very relevant in a minute.
So far, I do not think that is very different than simply withdraw funds from an existing CD or annuity. But there is a fundamental reason for the exchange of an annuity / plan for long-term care. Some insurance companies will allow you to add a rider that provides lifetime coverage. This is a huge benefit for a couple of reasons
First, most people have a 3 years or 5 years plan for long-term care. When the three or five years are up, that& 39;s it. Secondly, medical advances are prolonging life. About the kidney is a blink? No problem, a medical team vai just insert a new one. Third, the biggest problem is not on general health, but precisely the opposite. A person may be blessed with good health, develop Alzheimer& 39;s disease, lived for many, many years and exhaust your entire property on health care.
Now, we will return to the period of three years. The person has a (poor) long-term care policy that is good for three years. They move your CD or annuity for this combination annuity / plan for long-term care that is good for three years as well.
Here is the key point. If they added the rider kicks in life, which, after three years, they are good for duration.
Last, we will cover the " without paying premiums "
By move part of a CD or a combination of annuity plan, the person who created another three years plan for long-term care. No effort required here.
Adding the term rider has a cost. But since it did not start for three years, is like having a 3 years " term " in a traditional plan for long-term care, unlike the typical 60, 90, 180 day wait. So the premium is quite low.
Second, the premium can be paid by withdrawing from the annuity itself. Today, a person would have to pay taxes on the withdrawal (assuming there was a gain in income), but after 12/31/09 as it will be withdrawn without taxes. This is a new provision in the Pension Protection Act of 2006.
If you find yourself underinsured concerned, and take a look at their situation and see if this approach can solve your problem.
Robert D. Cavanaugh, is a Clu 36 years financial and estate planning veteran and author of the newsletter, " The Estate Preservation Advisor ". To register and obtain a free video, " How to Sell Your life insurance policy for more than the cash value ", go to http://theestatepreservationadvisor.com/freevideo.htm
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