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Is The Long-Term Care Insurance Industry In Peril?

A federal judge recently ordered long-term care insurer Penn Treaty to liquidate its assets and close up shop. That left customers by the thousands without coverage after they paid tens of thousands in premiums. Some observers believe this case bodes ill for the industry as a whole.

Here three things to consider as you decide whether long-term care is a good investment for you:

1. Know the averages. Those who need long-term care will need an average of three years' worth, according to federal estimates.  Median monthly costs are $7,700 for a private nursing home room, $3,600 for a private room in an assisted-living facility and $1,500 for adult day health care, according to a 2016 study by Genworth Financial, which offers long-term care policies. 

2. Assess whether you are likely to need long-term care. One-third of the population will need long-term care. Whether you will need it depends on your tolerance for risk and other factors, including your own health history, your current lifestyle and health habits, and your family history of chronic health conditions or inherited diseases. The risk of being uninsured isn't the only thing to consider. For example, what if the insurer goes out of business or the premiums jump 50 percent or more? 

3. Consider your financial picture and other funding sources. You might be able to afford paying long-term care insurance premiums while you're working, but what about after you retire? If you won't have enough income to pay premiums, you lose the policy and all the money you paid in to that point. If you own your own home and have a healthy retirement account or a pension, you might be able to afford premiums post-retirement, but it still might not be a good investment. 

LongTermCare.Gov offers care costs, which outlines the available options for paying for long-term care. These include combination life and long-term care policies, accelerated death benefits (in the case of terminal or life-threatening diagnoses), reverse mortgages and other strategies.

Long-term care insurance is expensive. It still might be a sound option, but you should carefully consider your health, finances and your own tolerance of risk. And experienced elder law attorney can help you consider the complex legal aspects of long-term care for you or your loved ones.

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  • Richard P. Johnson is Board certified Texas Board of Legal Specialization Estate Planning And Probate
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