Cost of Long-Term Care Rising, but It's Still a Good Deal

BY TERRY SAVAGE Published: November 23, 2010
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Stop what you're doing, and answer this question: Will you care for your parents -- and your in-laws -- in their old age? Will you invite them into your home, to use the bedroom your college kid just vacated, and will you provide them with help dressing and bathing?

Or let's reverse the situation: Who will care for you in your old age? Will your children invite you into their home and help you shower and take you to your doctors' appointments?

Think about it -- because one way or another, we're all going to be faced with this problem. If you're all alone, the situation might be even more dire.

The one answer to all these questions is long-term care insurance. I've been recommending it for years. I thought it was a great deal. And now I have proof.

Long-term care insurance policies have been such a great deal that one of the top underwriters -- MetLife -- has just announced it will no longer sell these policies. (Of course, it is contractually required to keep its existing policies on the books and stand behind them when payout is needed.) And another top LTC insurance underwriter, John Hancock (a division of Manulife), has just announced an intention to raise policy prices an average of 40 percent!

These policies were such a good deal that the companies were losing money on them. If you had followed my advice to limit payments to 10 years, you'd have a fully paid-up policy now -- a valuable asset.

Fortunately, a third major provider, Genworth, told me: "Genworth is committed to the long-term care insurance market. We've been there since 1974 and plan to maintain a leadership position in the industry going forward, with our overall goal of growing the industry, and not just Genworth's share."

But the real question is whether it's too late to buy a long-term care insurance policy. The answer is no -- with some caveats. Your policy will be more expensive -- but less likely to have the premiums increase in future years because the companies remaining in the business have more experience, which makes current pricing more accurate. You might have to settle for three years' coverage, instead of lifetime -- but that certainly would be a help if the need arises.

Ask your agent to help you find a policy with premiums you can afford. Compared with the cost of care, which is increasing much faster than the consumer price index, the premiums are moderate.

Long-term custodial care is not covered by Medicare or Medicare supplements -- but may be covered by Medicaid if you have spent down most of your assets.

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