Unauthorized withdrawals from IRA funds before the age of 59½ are typically subject to taxes and penalties, but it'...Read more
How Risky Is Buying a Limited-Duration Long-Term Care Insurance Policy?
- May 13th, 2010
More consumers are buying shorter-duration policies as a way to keep the cost of long-term care insurance affordable. For example, in 2009 almost one-third of individual buyers purchased a three-year benefit period policy, according to the American Association for Long-Term Care Insurance. But is that sufficient coverage or is the policyholder likely to run out of benefit dollars?
According to a new consumer guide by the industry trade association, the risk of running out of benefits on a three-year policy is small, particularly for men. Overall, of people who bought a policy with a benefit period longer than three years and made a claim for long-term care, only 13.1 percent needed that care for longer than three years. Only 7.6 percent of those with a policy that paid out longer than four years actually needed care for longer than four years, and only 4.5 percent of those buying policies lasting longer than five years needed care beyond five years.
Local Elder Law Attorneys in Ashburn, VA
Felinton Elder Law & Estate Planning Centers
Mindy Felinton concentrates in the areas of Medicaid planning, Veterans' Benefits, asset protection, nursing home planning, elder law, wills, estate planning, trusts, living wills, powers of attorney, probate administration and trust administration and began her legal career 30 years ago as an Assistant State Attorney...
Margaret A. O'Reilly, PC
Margaret A. O’Reilly is an estate planning and elder law attorney with over thirty-five years of legal experience. Attorney O’Reilly graduated from Duke University with a degree in psychology, and received her law degree from Northeastern University School of Law in Boston, Massachusetts. For over 15 y...
Needham Mitnick & Pollack, PLC
Susan Pollack served as Chairperson of the Falls Church Senior Citizens Commission from 1997 to 2011 and was on the Executive Board of the Falls Church Education Foundation. She has also served on the Board of Directors of the Alzheimer’s Association of the National Capital Area and is a member of the Arlington B...
Men with a three-year policy who begin a long-term care claim at age 82 (a typical age) have a 12.4 percent likelihood of exhausting their benefits, while women face almost twice the risk (23.5 percent).
The guide reports that a policy that pays benefits for three years costs between 42 percent and 54 percent less than one that will pay claims for an unlimited number of years. A two-year policy is 51 percent to 64 percent cheaper than an unlimited policy, while a five-year policy brings a 30 percent to 39 percent savings.
However, if you are one of the individuals whose claim goes past the expected number of years of your policy, you can expect to need care for anywhere from two to six more years, the guide reports. A 55-year-old man who exhausts a three-year policy can expect to need long-term care for another 3.7 years, while a woman of the same age would need an average of 5.3 years of additional care. An 82-year-old who exhausts a three-year policy can expect to need long-term care for another 1.9 years (men) to 2.9 years (women).
The new guide combines comprehensive claims-related data from various studies conducted over the past year by the trade group. In addition, the guide includes findings of a special study conducted for the association by the consulting firm Milliman, Inc.
"Before they buy, people want to know their real risk of using their insurance policy," said Jesse Slome, the association's executive director.
Last Modified: 05/13/2010