Do You Have a Viable Plan for Long-Term Care?
This type of insurance is pricey, but Medicaid is an imperfect fallback plan.
Forget gas prices, college costs, and cable bills. If you want an example of skyrocketing inflation, look no further than long-term care insurance premiums, which have jumped between 6% and 17% during the past year alone, according to the American Association for Long-Term Care Insurance. Some existing policyholders have been confronted with the choice of swallowing higher premiums or accepting benefit cutbacks, and during the past few years major providers such as
Prudential Financial (PRU) and MetLife (MET) have stopped writing new long-term care policies altogether. Not only are interest rates low, meaning the insurers can't earn much on the premiums and have to charge more to compensate, but insurers have had to cover larger claims for long-term care than they anticipated when they initiated the policies.
Given that inhospitable backdrop, many consumers are opting to go without long-term care insurance altogether. Wealthier individuals might decide to foot the bill from their own savings when and if they need long-term care. Less-affluent consumers, meanwhile, may conclude that forking over long-term care premiums simply isn't a good use of their assets if they're also behind on being able to meet basic needs during retirement, or they have missed the window to purchase long-term care at a reasonable price. (By the time a person hits his or her mid- to late 60s and might also be experiencing health issues, the policies can be exceptionally costly.) For such people, Medicare and Medicaid might be their only options should they need long-term care.
Christine Benz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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