Reverse Mortgages can help pay for Long Term Care (LTC)
You might have sticker shock if you’re in the market for long-term care insurance. Here are seven alternatives to consider.
Many long-term care insurance customers in Pennsylvania got a shock when their renewal notices arrived this year. Premiums were increasing by as much as 130 percent, and annual rates are on track to reportedly exceed $8,000 for some policies.
The increases have spurred outrage from policyholders and an inquiry by the Pennsylvania Insurance Department. Those familiar with the long-term care industry say the problem isn’t isolated to Pennsylvania and dramatically increasing rates may be expected nationwide in the years to come.
Factors pushing insurance rates higher
There are a number of factors contributing to the explosive growth in long-term care insurance premiums. “When [long-term care insurance] came out in the 80s and 90s, it was priced wrong,” says Larry Rosenthal, a certified financial planner and president of Rosenthal Wealth Management Group in Manassas, Virginia. Carriers assumed people would drop policies as they got older. However, that didn’t happen in many cases. What’s more, people are living longer and aren’t necessarily living healthier. As a result, Rosenthal says many insurance companies have fled the market and those that remain have increased premiums significantly to keep up with costs.
Compounding the problem is the fact that many people wait too long before buying a policy. “No one buys it at a young enough age for it to be inexpensive,” says Kevin Boyles, vice president of retirement and college-savings-services provider Ascensus. The ideal time to start planning is between 52 and 64, according to the American Association of Long-Term Care Insurance. Those who wait longer face higher premiums and an increased possibility of being denied coverage.
People are often confused about how to pay for long-term care. “Resources they think exist don’t exist,” says Laura Troyani who founded the website PlanBeyond.com. Most notably, many seniors expect Medicare will cover costs when, in fact, the program does not pay for ongoing long-term care. While Medicare isn’t an option, here are seven alternatives that are.
Home equity – Reverse Mortgages
Retirees without significant investments may still own a valuable asset: their house. Tapping into home equity through a line of credit, taking out a reverse mortgage or selling a house outright are some of the ways people can use their property to pay for long-term care. Click here to read more about using reverse mortgage to fund Long Term Care (LTC).