LONG TERM CARE 16
California Department of Insurance
Protecting California Consumers
Toll Free 800-927-HELP
Can I Afford Long-Term Care Insurance?
Most people should not spend
more than 7% of their total annual income on annual premium
for a long - term care insurance policy. Estimate your discretionary
income by subtracting your fixed expenses from your annual
income. Then decide how much of that discretionary income
you want to spend on long- term care insurance premiums.
Remember that after retirement,
income often does not keep pace with inflation. As you age
you are more likely to have unexpected medical expenses, such
as prescription drugs or other medical costs that may not
be covered by your medical insurance. The loss of a spouse
can also result in reduced income.
Select a premium you can comfortably afford. Take into consideration
that your premium may increase during the years you own the
policy. When talking to an agent about long-term care insurance
it is important for you and your agent to understand your
financial circumstance s so that he/she can tailor a plan
best suited to your needs.
Should I Replace My Existing Policy with a Newer
One?
The advantage of replacing an
older policy is that newer policies may offer more desirable
benefits and features and fewer restrictions. Assisted living
in an RCFE, Home Care benefits, Inflation Protection, and
no requirements for a prior hospital stay are some of the
benefits and features being offered in current long-term care
products. However, just because a policy is newer does not
necessarily mean it is better than the one you have.
One disadvantage to replacement
is that the insurance company will charge higher premiums
because you are older than you were when you bought your original
policy. In addition, if you have any preexisting
conditions or are 80 years old or more, companies may refuse
to issue new coverage. If you are still insurable you might
consider adding new coverage to the benefits you already have,
or buying an additional policy to supplement your existing
benefits. Even very old policies still provide a benefit,
and the premiums are often much less expensive than a premium
for a brand new policy at an older age. Before you add benefits
to an existing older policy you should check with your agent,
company, or tax advisor to see if you will lose the grandfathered
tax status granted policies purchased prior to January 1,1997
If you are considering replacing an older policy, first ask
your current agent or insurer if you can update your coverage.
If you replace your policy with the same company you are likely
to get a credit for some percentage of the premiums you have
already paid against the new premium. Another possibility
is to keep the older policy and add a newer one to supplement
the daily benefit in the old policy, or add some of the newer
benefits not in the older policy. Adding another policy won’t
cause the loss of any tax advantages you have for the older
policy. Whenever you are considering replacing a policy, consulting
a HICAP counselor is recommended.
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