Few expenses will wreck the finances of a retiree like having to pay out of pocket for long term care in a nursing facility. That is why long term care insurance policies have been popular with those that are crossing the age 65 threshold since it promises to cover the expenses involved… but there is a catch. A retiree has to keep up with the yearly premiums, which usually run over $1000, or the policy will lapse and leave the holder out in the cold. Potentially, a policy holder could make payments for decades only to allow it to lapse just before they needed to take advantage of it. As a result, when planning for an estate that holds a LTC policy make sure funds will be available to continue paying so a lapse is avoided. Rates will go up overtime so it would beneficial to assume a %3-5 increase every year when it comes to budgeting down the line. Smart planning concerning LTC policies is a must and will help bring much peace of mind to a client that is a holder.
See, Boston College: Many People Letting LTC Policies Lapse, Financial Advisor Magazine, October 22,2015.
Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.
