Using Long-Term Care Insurance

Are premiums guaranteed to remain level for the rest of my life?

Premiums on a long-term care policy are not guaranteed to remain level for the rest of your life. The insurance companies don't intend to raise the rates, but you have to understand about long-term care insurance. It's relatively new. It's only been around for 20 or 25 years. When long-term care insurance was first invented, the average person with Alzheimer's died in a year, once it was diagnosed. Today, Alzheimer's patients are living for up to 10 years. There are drugs that they're even saying stop the condition altogether. If a person puts in a claim for long-term care and lives and extra 10 years, and the insurance company didn't price the product properly, they have the right to raise their rate. It's not that easy for an insurance company to raise their rates on a long-term care policy. Senior citizens, who typically buy long-term care policies, are very well protected by the government. The government says, "We don't want insurance companies increasing the premiums so much that the client, the policyholder, has to cancel the insurance." It takes a while for an insurance company to ever get an approval from the state insurance commissioner to raise the rates. When people put things in perspective, they realize that it's still a good deal, and in reality, very few insurances are guaranteed level premium forever. If you own a boat, today it's $100 a year, next year it might be $150. Car insurance could go up. Health insurance goes up. Pretty much everybody understands it. Seniors, as they get older and they become relegated to a fixed income, are very sensitive to increases in premiums. The insurance companies really are trying not to raise rates. When I see a client, I tell them up front that the insurance rates are not guaranteed.

Are long-term care benefits taxable?

One of the great things about a long-term care policy, and the reason why people are buying it, is that when you receive the proceeds the proceeds from a long-term care policy are tax free.

What do I do if my long-term care insurance claim is denied?

It's rare that a long-term care policy doesn't pay the claims when it's a legitimate claim. But I have another story that many months ago a client of mine called me up and said that she wanted to put in a long-term care policy. After having a serious discussion with her I realized that her main reason for wanting to put in a claim was she was really lonely--her husband passed away, she had nobody in life, and she really wanted somebody to take care of her. Unfortunately, long-term care policies don't take care of you if you're lonesome. You have to be unable to do those two activities of daily living that I discussed earlier.