“I don’t think there’s a chance of me ever qualifying for Medicaid.” (Photo subject is a model.) – Getty Images
I have had a long-term-care insurance plan for 15 years. During that time, they’ve raised my premiums 356%. It’s now $12,000 a year with no end in sight for future increases. The max they will pay at this point is about $750,000 over 5 years.
I need to cut the cord with them and I’m sure they would also be delighted if I did. My adviser, who suggested this policy 15 years ago, is not too helpful (that’s another problem). They will give me a benefit equivalent to what I’ve paid into it over the past 15 years ($66,000) if I cancel now.
I’m now over 70 and a widow, so this is something I need for peace of mind. I’ve been talking to an insurance broker who is suggesting a long-term-care/life-insurance hybrid policy, which pays $365,000 paid over a 10-year period.
Yes, I would have to go through a medical approvals process for a new policy. Luckily, I’m pretty healthy. I don’t think there’s a chance of me ever qualifying for Medicaid. I don’t have anyone to bounce ideas off of right now. What should I do?
It’s kind of a lose-lose situation. Whether I keep my policy or self-fund my long-term care, what if I become cognitively impaired and need benefits for 15-20 years? Jeesh, no wonder my blood pressure is sky-high; at least it was at the doctor’s office today.
Widow
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Whether I keep my policy or self-fund my long-term care, what if I become cognitively impaired and need benefits for 15-20 years? – MarketWatch illustration
If you have paid $66,000 into this policy over the last 15 years, and the insurance company is willing to give you that back by canceling the policy now, it’s not so much a lose-lose as a return on your investment.
Given that you are in good health, in your 70s, there’s no guarantee that you will require long-term care, although being a widow, and with no mention of children, I understand that you are concerned about your future if and/or when you become unable to live independently.
For that reason, I’m not sure a long-term-care/life-insurance policy hybrid would be the answer. I can’t help feeling that your financial adviser talked you into the original policy, and now a broker is talking you into a new one. That’s their job, for better or for worse.
A quick recap: Long-term-care insurance effectively doubles between your 60s and 70s. Most women at age 70 can expect to pay a premium of $662 a month (compared with $966 for someone 75 years old), according to this guide from SmartAsset.
It’s more expensive for women due to their longer life expectancy (it costs around $524 for a 65-year-old single woman versus $313 for a 65-year-old man). Medicare does not cover long-term-care insurance, and you don’t qualify for Medicaid.
If you do switch to a long-term-care and life-insurance hybrid policy, you will end up paying much more than what you are paying now. The death benefit may not be as advantageous to you as a widow with — I’m assuming you didn’t mention any — no children..
It’s hard to make a call on your behalf without a more detailed view of your finances. For that reason, I suggest you enlist independent third-party help: a fee-only fiduciary who can give you a bird’s eye view of your finances without the incentive to sell you another policy.
This may or may not help, but you are one of millions of people who face this same dilemma: how to fund a long-term-care situation, given that a room in a nursing home could cost $100,000 a year, or more in a high-cost-of-living metropolitan area.
If you do cancel this current policy because of the unpredictable and constant increases in your monthly premium along with the pressure on your monthly expenses, plan now for what you should do in a worst-case scenario.
Other options for you include high-yield savings accounts, deferred long-term care annuities, and/or a home equity conversion mortgage, a form of reverse mortgage insured by the Federal Housing Administration (you must be 62 and have a low or no mortgage balance).
On a separate note, I’m not a doctor, a broker, a financial adviser, a lawyer or even a candlestick maker, but I would gently advise you to keep an eye on your blood pressure and have it checked again in a few weeks.
You may need medication to keep it under control and blood tests should give you an indication of whether there are any problems that could slow you down (such as high cholesterol) or lifestyle factors like stress, anxiety, lack of sleep or exercise, or genetics.
None of us wants to fiddle with our finances while neglecting our health. It’s so easily done when we’re thinking about external factors like retirement, housing, work and — last but not least — money.
A vigilant Moneyist reader is, hopefully, a healthy Moneyist reader. Let’s hope that, in five years, we can talk again about a completely different situation (or the same one, if the fancy takes you). Long-term-care insurance is a good idea, but it’s also a balancing act.
Enjoy the good years, in the meantime, while you have them.
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Previous columns by Quentin Fottrell:
‘Poof! His money could disappear’: My boyfriend is 75. His portfolio is down 4% this year. Do we fire his adviser?
‘He cannot match my spending’: I’m 65 and have $7 million. My boyfriend is 73. Should he release equity from his home so we can enjoy retirement?
‘I have a degree in economics’: I’m 70, earn $250K a year and have $3.7 million in investments. Is it time to retire?
