A Primer on Insurance Products
by Peter Katt
This column provides practical commentary on insurance products, issues and planning that I frequently encounter. I hope you can use it as a quick check to see whether the insurance or proposals you encounter make sense.
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Long-Term Care Insurance
Long-term care insurance is a risk management asset designed to protect against the costs of needing care during old age. However, these policies do not cover medical or critical care situations. Long-term care workers assist insureds with the difficulties of daily living activities. Many plans pay a stipend, so it doesn’t matter whether the care is received in an institutional or home setting.
Under the right circumstances, long-term care insurance is a bargain—but there are some cautionary issues to be aware of. Long-term care premiums have risen considerably, and may continue to rise, causing long-term care owners to terminate their policies. A number of companies have left this market and more will. I believe companies didn’t think through long-term care insurance very well and now regret opening up this market. As a result, getting claim approvals could be tough, which is what happened with disability income insurance in the 1980s and 1990s.
I have found that some clients have a special fear of personally funding long-term care and are motivated to buy it regardless of cautions. Clients without these fears generally don’t buy long-term care insurance.
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