Protecting your golden years

Regardless of your post-employment plans, seek out a policy for long-term care

not raised rates for existing policyholders. “Some companies have made honest mistakes and priced their policies too low,” Haslett says. “Claims have been higher than expected, so they’ve had to raise premiums. Other companies have used bait-and-switch tactics, enticing consumers with prices they knew would be raised in the future. Either way, you should avoid the companies that have increased premiums in the past.”

Haslett mentions companies such as GE, John Hancock, Transamerica, and Unum as financially sound industry leaders that are likely to maintain premiums. “Insurers like these don’t want to attract negative attention in the media nor do they want to trigger adverse legislation,” he says. “Therefore, they can’t afford to be too aggressive in raising rates, so it’s likely that your initial premium will remain fixed.”

Inflation protection
“Your policy should have an increasing benefit,” says Fulbright. “You might buy a policy that pays $100 per day but, by the time you need care, which might be 10 years from now, that $100 won’t cover the costs.” A sound policy, he says, will increase that benefit each year, so it might pay $150 per day when the policyholder is in need of care.

Full coverage
Home care is now as expensive as institutional care, so your LTC policy should pay benefits in either situation. An exception to the rule is single women-especially widows-who live alone. They are probably better off in a facility if they need care. Home-care aides can present a huge security risk to these women since background checks on these workers are rarely performed.

Since single women may be better off in a nursing home or assisted living facility, they might as well buy an LTC insurance policy that covers only facility care. Such policies are usually 40% less expensive than those that cover home healthcare.

Before buying LTC insurance, consider the tax consequences. “Federal law permits deductions for the premiums in some cases, but only 4% of all taxpayers will qualify,” says Haslett. “Therefore, at least 30 states offer tax breaks of their own. Often, you can take state income tax deductions for the premiums not deductible on your federal tax return.”

As you develop your plan for retirement, make sure that you have the proper coverage. The last thing you want to do is to be at the mercy of the elements, natural or otherwise.

Characteristics of Long-Term Care Policies
Regardless of your retirement plans, here’s a short look at some details to consider when choosing a long-term care policy:

  • Detail 1: Purchase a long-term care insurance policy in your early years. Premiums on such policies can be much cheaper before age 70.
  • Detail 2: Make sure your policy has an increasing benefit, so that the coverage is on par with the cost of service when the time comes.
  • Detail 3: Who will take care of you? See if you need a full-coverage policy, which may include home care and institutional care.
  • Detail 4: Before purchasing the insurance, consider the tax consequences. Some states offer tax breaks, while federal law permits deductions for premiums in
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