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What Happens to Unused Long-Term Care Insurance?

INDONESIAKININEWS.COM -  People who have traditional long-term care insurance get no benefit from the coverage if they die without ever need...



INDONESIAKININEWS.COM - 
People who have traditional long-term care insurance get no benefit from the coverage if they die without ever needing long-term care. 

However, some kinds of long-term care insurance let a surviving spouse or partner use unused benefits. 

Others provide for partial or full return of the premium if the original policyholder dies without using the benefits. These variations cost more than traditional life insurance, however. 

A financial advisor can help untangle the costs and benefits of long-term care insurance. 

Try using our free advisor matching tool today to find advisors who serve your area.

Long-Term Care Insurance Basics

Long-term care insurance helps pay for healthcare costs that aren’t covered by Medicare or conventional health policies. 

It’s designed to help disabled people and those with chronic health conditions pay for the costs of assistance with activities such as dressing, bathing and eating. 

It can also cover nursing care but isn’t designed to pay for medical care of the type covered by health insurance, such as doctor visits, lab tests and hospital stays. 

Long-term care insurance can cover expenses arising from in-home care as well as bills for living in nursing homes and assisted living facilities.

Long-term care can be quite expensive, with monthly median costs ranging from $1,690 for adult day care to $9,034 for a private room in a nursing home, according to long-term care insurance company Genworth. These costs, which aren’t typically covered by Medicare, can quickly drain the nest egg of a retiree without long-term care cover.

Insurance to pay long-term care costs can be comparatively inexpensive. The average annual premium for a 55-year-old man ranges from $950 to $3,685, depending on the policyholder’s health and the size of the benefit, according to the American Association for Long-Term Care Insurance (AALTCI), an insurance industry organization.

However, half of long-term care insurance policyholders die before ever using their benefits, according to the AALTCI. For the majority who purchase coverage that doesn’t begin paying until 90 days after the covered individual begins needing long-term care, only 35% ever use their benefits, AALTCI found.

Shared Spousal Benefits

One way to get some value from unused long-term care insurance policy benefits is to get a policy with shared spousal benefits. 

This is a type of traditional long-term care insurance that covers a couple and allows a surviving spouse to take advantage of any unused benefits remaining after the other spouse dies.

If the deceased spouse used all the policy’s benefits before dying, then the surviving spouse would get no benefits from that policy. 

However, if either spouse uses all the benefits available to them, he or she can then begin using unused benefits from the other spouse’s coverage. One advantage of spousal benefit policies is that the likelihood of the policy’s benefits being used is much higher when two people are covered.

Return of Premium Policies
What Happens to Unused Long-Term Care Insurance?

Policies that provide for a return of premium are also an option to get some benefit from paying for unused long-term care insurance coverage. These policies, which blend long-term care coverage with life insurance that has a death benefit, will pay back some portion of the premiums on an unused policy when the policyholder dies.

These hybrid policies vary significantly in the number of premiums they will return. Some return all the premiums plus an additional death benefit. 

Others will return only the amount of the premiums minus any claims that have been made under the policy. Still, others offer a graded return that decreases as the policyholder gets older.

Other Long-Term Care Coverage Options

There are other types of policies and investments that you can use to get long-term care benefits. 

The two most popular options will provide a payout for you if you need long-term care or you will be covered for long-term care in a hybrid policy that goes along with another type of coverage. 

Let’s take a look at how each of the two most popular alternatives works.
  • Annuities With Long-Term Care Benefits: Some fixed and indexed annuities can come with contracts that provide you with an extra payout if it is determined that you need long-term care. As soon as it is confirmed that you need long-term care the annuity starts to pay out a higher monthly benefit that is a multiple of whatever premiums you’ve paid already.
  • Hybrid Long-Term Care Insurance: You can get a life insurance policy that serves as a hybrid for both life and long-term care insurance. Medical underwriting is typically less rigorous than it is for traditional long-term care insurance. You can even get access to lifetime or unlimited long-term care benefits in this type of policy.
Bottom Line

Many buyers of long-term care insurance die before making any claims under the policy. If they purchased traditional long-term care insurance coverage, this means they have paid their premiums without receiving any financial benefit. 

There are other options to help you get more out of your policy, though. For example, policies with shared spousal benefits will, however, allow a surviving spouse to make use of any unused benefits. 

Return of premium policies offer another option to get benefits from unused long-term care insurance policies, but they are significantly more expensive.

Tips for Long-Term Care Insurance

A financial advisor can help you weigh the costs and benefits of the different types of long-term care insurance, including ways to benefit from a policy that is never used. 

Finding a qualified financial advisor doesn’t have to be hard. 

SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. 

If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Be sure to use the free SmartAsset retirement calculator to get a quick estimate of how you’re preparing for retirement.

Source: smartasset


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