Long term care insurance contracts are guaranteed

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six ADLs are eating, bathing, dressing, transferring from bed to a chair, using the toilet, and continence. Long-term care insurance contracts are guaranteed renewable. This means that once a person has been approved, their coverage cannot be canceled due to a change in health condition. There is also a feature that protects rates from rising after the policy has been initiated. This feature needs to be better understood before we move on. The insurance company will not raise rates on a specific person after policy issuance, but they can (and do) raise the rates for the entire risk category of insured people (a "rate class"). Some people report that premiums have risen considerably (Links to an external site.)Links to an external site. . This does happen in practice and should be fully explained to clients before they purchase LTC insurance products. In fact, Mass Mutual just recently applied for a 77% rate hike for its Long-Term Care policies . If you spend money on an LTC policy and then do not use it, your premiums were paid in vain. There is no refund of unused premiums. Many people have shunned long-term care insurance because, like most
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forms of insurance, the insured person is paying to shift risk to an insurance company. If the insured event never happens, then the insurance is never triggered and the money was spent without a physical service being provided. One solution to this problem is a lump-sum long-term care policy . This is actually a hybrid insurance product that combines a universal life insurance policy with a long-term care rider . Logistically, a lump sum policy involves a client paying a single lump sum up front as their premium. This number could be $50,000. It could also easily be $150,000 or more depending upon the coverage requested. Then, there is a rider on the universal life insurance policy that will use the insurance policy’s value to pay for long-term care needs should they arise. But, if the LTHC benefits are not needed, then the full value of the universal life policy becomes just like a regular universal life insurance policy. The full death benefit remains intact for the client’s heirs. If LTC benefits are paid but they are less than the face value of the universal life policy, then benefits could still be paid. As with all life insurance products that are held outside of a retirement account, all proceeds from this policy are tax-free. This is a creative new product to help solve the needs of an aging population who are leery of buying insurance products for higher probability events. The advantage is that the insured knows that the insurance company will have to pay out on this policy, either for LTC or a death benefit. The disadvantage is that it will be more expensive than a traditional LTC policy. Click here for a recent article from the Wall Street Journal talking about Long Term Care Insurance.
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