In many cases, long-term care insurance is an important financial planning tool. LTC policies provide financial assistance for the cost of care for chronic illnesses, disabilities or injuries associated with aging. Policies cover; nursing home care, assisted living facility care, home health aides, adult daycare and more. Although many older adults require long term care, there are some who do not. We will discuss; what happens with unused LTC policies.
Approximately 70% of Americans will need long-term care at some point. Although the level of care and length of time needed varies by individual. The likelihood of a need for long-term care increases with age. The premium for a LTC policy can be difficult to afford for many people especially on a fixed income.
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What happens if you don’t use the policy
If you spend your hard-earned money on a plan and never need it, do you just lose all that money? Is there any value in a LTC policy if you never use it? The answer to that question depends on the type of LTC policy the beneficiary chooses. 
Traditional LTC policies
Beneficiaries who opt for a traditional LTC policy can expect payment of the contracted amount if they require long term care. With these policies, if the beneficiary does not require these services, the policy has no value and can end up costing quite a bit.
Those who purchase traditional policies may have a difficult time maintaining coverage due to the rising costs as their age increases. Policies do not usually have a guaranteed premium amount. When this happens, many seniors find themselves unable to afford the policy and end up dropping the coverage.
There are partnership policy options for those who wish to purchase a traditional LTC policy. Partnership policies are a way for policyholders to protect assets if they exhaust long-term care benefits and must apply for Medicaid. Each state has specific requirements for partnership policies and provide protection against inflation.
Hybrid LTC policies
Hybrid LTC policies may be a good alternative to traditional policies. They provide value even if the beneficiary does not require long term care. Hybrid policies may be combined with either a life policy or an annuity. In other words, there is value in this option in different circumstances.
With a hybrid policy, beneficiaries who decide to discontinue coverage may be able to leave with some cash. Annuity based plans provide the annuity’s value less the surrender charges. Those who add a return of premium rider could leave with their entire plan cost back. In this scenario, the beneficiary does not lose. If the beneficiary dies without using the policy, their heirs may receive a tax-free death benefit similar to a life insurance policy.
What to consider when purchasing a LTC policy
The premiums for LTC coverage may be expensive, therefore think carefully about your budget when choosing a plan. Age, health, coverage amount, elimination period are a few things that contribute to the cost of coverage. Many plans offer optional features, like inflation protection or a non-forfeiture benefit, that may also be important to consider.
In some situations, there are discounts on coverage. Some examples include; if the enrollee is in good health or if the policy is purchased by a couple.
Information for Agents
We have a number of long term care products available to offer your clients. Options include: traditional as well as fixed annuity & long-term care rider, Life and long term care or chronic illness rider. We also have several, affordable short-term care plans available. To find out more about our products; contact our office at 203-796-5403 or email teal@croweandassociates.com.
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The bottom line
By comparing the different coverage options, elimination and benefit periods, as well as costs, beneficiaries can make informed decisions. A licensed insurance agent can also add valuable insights into benefit options and costs.
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