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Long-term care insurance hits a crisis point

A Jan. 18 article in the Wall Street Journal says premiums for long-term care insurance are going up so fast that some policy holders can’t afford the premiums. Some people are even going back to work to afford the payments. Others are walking away from policies.

The crux of the crisis is bad actuarial assumptions, lower than expected policy lapses, the popularity of long-term care facilities, people living longer and low interest rates, the Journal reports. The bad actuarial decisions have left insurers scrambling to have enough money to cover claims. Premiums can go up 50 to 150 percent.

In many types of insurance, many policy holders never get a payout, which helps spread risk. However, most people that get long-term care insurance eventually need the coverage, which means the risk isn’t spread as much, said Melinda Kibler, a certified financial planner with Palisades Hudson Financial Group in Fort Lauderdale.

Since the bulk of buyers will eventually collect, the long-term care insurers have to raise premiums, Kibler said in an email. This, in turn, will cause the healthier portion of the population to opt out, leaving a pool of less-healthy participants who all believe they will need to collect on this insurance sooner than later.

Wealthy people don’t need the policies because they can afford care, while those with minimal assets can get expenses paid by Medicaid after they burn through their cash, Kibler said. The ones stuck are somewhere in the middle.

“Instead of paying into a policy with rising premiums that may empty your retirement savings, it is better to plan for long-term care by saving and investing,” Kibler said. She runs cash flow projections for clients to help figure things out.

Another factor to consider is whether you want to leave money to your heirs. Life insurance might be a better option than a long-term care policy when it comes to doing so since the policy costs are more predictable, Kibler said.

Those who want to transfer assets to their children to qualify for Medicaid coverage need to be wary. If you apply for Medicaid within 60 months of transferring your assets, you’ll pay a prorated penalty based on the average monthly cost of care in your area.

Kibler also recommends getting a lawyer who specializes in estate planning in elder care if you want to set up a trust to transfer assets. Without the right trust, your son or daughter could lose a lot of the assets if there is a divorce.

 

 

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Drew Limsky

Drew Limsky

Editor-in-Chief

BIOGRAPHY

Drew Limsky joined Lifestyle Media Group in August 2020 as Editor-in-Chief of South Florida Business & Wealth. His first issue of SFBW, October 2020, heralded a reimagined structure, with new content categories and a slew of fresh visual themes. “As sort of a cross between Forbes and Robb Report, with a dash of GQ and Vogue,” Limsky says, “SFBW reflects South Florida’s increasingly sophisticated and dynamic business and cultural landscape.”

Limsky, an avid traveler, swimmer and film buff who holds a law degree and Ph.D. from New York University, likes to say, “I’m a doctor, but I can’t operate—except on your brand.” He wrote his dissertation on the nonfiction work of Joan Didion. Prior to that, Limsky received his B.A. in English, summa cum laude, from Emory University and earned his M.A. in literature at American University in connection with a Masters Scholar Award fellowship.

Limsky came to SFBW at the apex of a storied career in journalism and publishing that includes six previous lead editorial roles, including for some of the world’s best-known brands. He served as global editor-in-chief of Lexus magazine, founding editor-in-chief of custom lifestyle magazines for Cadillac and Holland America Line, and was the founding editor-in-chief of Modern Luxury Interiors South Florida. He also was the executive editor for B2B magazines for Acura and Honda Financial Services, and he served as travel editor for Conde Nast. Magazines under Limsky’s editorship have garnered more than 75 industry awards.

He has also written for many of the country’s top newspapers and magazines, including The New York Times, Washington Post, Los Angeles Times, Miami Herald, Boston Globe, USA Today, Worth, Robb Report, Afar, Time Out New York, National Geographic Traveler, Men’s Journal, Ritz-Carlton, Elite Traveler, Florida Design, Metropolis and Architectural Digest Mexico. His other clients have included Four Seasons, Acqualina Resort & Residences, Yahoo!, American Airlines, Wynn, Douglas Elliman and Corcoran. As an adjunct assistant professor, Limsky has taught journalism, film and creative writing at the City University of New York, Pace University, American University and other colleges.