Lock in Long-Term-Care Insurance Rates

Kip Tips

Lock in Long-Term-Care Insurance Rates

The upfront costs are higher, but there are ways to guarantee that your premiums won't increase.

Kiplinger.com columnist Kim Lankford recently wrote that MetLife, one of the largest providers of long-term-care insurance, will stop selling long-term-care policies. She also said two other long-term-care insurance providers have proposed premium hikes for current policyholders. That's because the companies are getting more claims than they expected and need more funds to pay them.

Naturally, the fact the insurers are raising long-term rates or getting out of the business entirely has policyholders worried. However, there are ways for people to guarantee that their long-term-care premiums won't rise. Kim Lankford explains how in the January issue of Kiplinger's Personal Finance magazine:

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Traditional long-term-care insurance policies always carry the risk that rates will be raised in the future. However, most insurers offer versions of their policies that charge higher premiums upfront but are paid in full after ten years of by age 65. After that, the insurer cannot raise your rates. These policies, sometimes called ten-pay policies, require a big initial investment and tend to be appropriate for people who have a large chunk of retirement savings on hand. A new law that took effect in 2010 permits tax-free transfers -- know as 1035 exchanges -- from an annuity to pay long-term-care premiums.

You can also get a guarantee that rates won't rise with a type of policy that has an upfront payment and combines long-term-care protections with life insurance or annuities. For example, if a healthy 65-year-old invests $100,000 in Lincoln Financial's MoneyGuard policy, she can get more than $83,000 per year of long-term care for up to six years (totaling nearly $500,000). If she never needs care, her heirs will receive a $166,407 death benefit. And if she needs to tap some, but not all, of the combo policy for care expenses, her heirs will inherit whatever remains of her original investment.

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