What Happens to Unused Long-Term Care Benefits?

Long-term care benefits
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Not all policy holders use their long-term care insurance.

Nobody likes making an investment with no return.

It feels pointless and like a terrible waste.

Even so, some investments require a gamble.

Or do they?

According to a recent Yahoo Finance article titled “What Happens if You Don’t Use Long-Term Care Insurance as a Senior?,” one area where the risk is often worth the reward is insurance.

Long-term care benefits can be lost when unused.
Certain long-term care plans can feel like throwing away money when unused benefits are lost.

While many people know they need insurance on their homes and their cars, they often forget the value of long-term care insurance.

Medicare often does not cover or limits coverage when assistance is required for what are known as the “activities of daily limits,” like bathing, dressing, or eating.

Except for short-term rehabilitation needs, coverage for nursing homes, assisted living, and home care are also not included.

For these service, individuals need more than their typical health insurance.

They will require long-term care insurance to help offset the costs.

Although about 70% of adults who reach age 65 will require long-term care at some point in their lives, about 30% will not.

In fact, about half of insured individuals may die before the insurance benefits can be used.

Of those who have policies with payments delayed until 90 days after long-term care insurance is required, only about 35 percent will use the benefits.

What happens when this insurance is not used?

This depends.

With a traditional long-term care policy, there will be no benefit if one dies prior to needing the funds.

Other options do exist.

These include long-term policies allowing partners and spouses to utilize unused benefits.

The policy covers both spouses and allows for the unused benefits to be used by the surviving spouse.

If one spouse uses all of his or her benefits, this spouse could also use some of the benefits of his or her spouse.

With two people covered, it is more likely the benefits will be used.

Some insurers also provide an option of returning partial or full premiums for unused benefits.

There also are hybrid policies between long-term care and life insurance with a death benefit.

The unused amount will be paid as the death benefit after the insured individual dies.

Although some return the full premium with the additional death benefit, others will only return a portion of the amount.

In some cases, the return amount will decrease as a person ages.

Although there are benefits to these hybrid policies, they are often more expensive than traditional long-term care insurance policies.

When it comes to purchasing long-term care insurance, you should review your options to select a plan to meet your needs and your desired level of risk.

Regardless, a consultation with your financial advisor and a long-term care insurance specialist is essential when making an informed decision.

Reference: Yahoo Finance (June 1, 2022) “What Happens if You Don’t Use Long-Term Care Insurance as a Senior?”

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