How To Supplement An Existing Long Term Care Policy Without Paying Premiums
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
How to Enhance Your Long Term Care Policy Without Paying Premiums
Introduction
If you had the foresight to purchase a long term care policy 5-10 years ago, congratulations are in order. Buying young significantly reduces premium costs, which can be dramatically different from those for older individuals. For instance, premiums at age 45 are a stark contrast to those at 65, the age when many start considering long term care.
Why Consider Supplementing Your Policy?
Nursing home expenses have skyrocketed?"from about $43,000 annually five or six years ago to $70,000 today. This substantial increase often prompts policyholders to enhance their coverage to meet current costs. Unfortunately, older individuals face much higher premiums, sometimes making it unaffordable.
Over the past five years, long term care premiums have risen about 40%, partly due to insurance companies revising their initial, overly optimistic pricing models. As these companies gained more data, they adjusted premiums to reflect the true cost of claims, impacting older policyholders seeking additional coverage.
A Solution: Utilizing CDs and Annuities
Many people have Certificates of Deposit (CDs) and non-qualified deferred annuities that are often untouched. Some insurance companies offer products allowing you to transfer these funds into a combination annuity/long term care plan.
How It Works
This product functions like an annuity with tax-deferred growth at a set interest rate. However, it offers flexibility: should long term care be necessary (adult day care, respite care, hospice, assisted living, or nursing home care), funds can be withdrawn over a three-year period.
While this resembles withdrawing from a CD or annuity, there's a crucial advantage: a rider can be added for lifetime coverage. This addresses several concerns:
1. Typical Plans Duration: Most long term care plans have a three or five-year benefit period. Once that expires, you're left unprotected.
2. Advancements in Medicine: Medical progress means longer lives, increasing the risk of outliving coverage.
3. Chronic Conditions: Diseases like Alzheimer's can exhaust finances if longevity outpaces coverage duration.
The Key Benefit: Lifetime Rider
By transferring a CD or annuity into this plan and adding a lifetime rider that activates after three years, you extend your coverage indefinitely.
How to Avoid Paying Premiums
Moving a CD or annuity into this plan effectively creates an additional three-year long term care policy, with no initial outlay. Adding the lifetime rider incurs a cost, but it only starts after three years, resembling a waiting period in traditional plans, making the premium quite affordable.
Furthermore, the premium can be paid from the annuity itself. While currently taxable if there's a gain, from 2010 onward, such withdrawals will be tax-free, thanks to the Pension Protection Act of 2006.
Conclusion
If you find your long term care policy inadequate, consider leveraging your CDs or annuities with this approach. It could be the solution you've been seeking.
You can find the original non-AI version of this article here: How To Supplement An Existing Long Term Care Policy Without Paying Premiums.
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