Limited-Duration Long-Term Care Insurance

It seems attractive on the surface. But elder law attorney Gene L. Osofsky of Osofsky & Osofsky advises that buying a limited-duration long-term care insurance policy entails inherent risks.

Consumers are increasingly buying shorter-duration insurance policies as a remedy for making long-term care insurance an option. 2009 highlights the trend nicely. That year 32% of individual consumers purchasing a long-term care policy opted for a three-year benefit window, according to a report published by the American Association for Long-term Care Insurance. Will such purchases ensure sufficient coverage to the policyholder or allow benefit dollars to keep on keeping on?

“Actually, the risk of running out of benefits on a three-year policy is quite modest,” asserts Gene L. Osofsky, an elder law attorney with the firm of Osofsky & Osofsky, “particularly for men.”

Osofsky’s perspective is supported by empirical evidence. According to a consumer’s guide published by the industry trade association, the risk of “running on empty” as far as benefits are concerned is small, especially for men. For those purchasing policies longer than three years who made a claim for long-term care, only 13.1% required that care for 3+ years. As the insurance window grew longer, only 7.6% of those with a policy that paid out 4+ years actually required care longer than four years and a mere 4.5% of those buying policies with a payout window of 5+years needed care beyond that threshold.

Osofsky is also accurate when gender is considered. Men with a three-year policy who begin a long-term care claim at age 82 (a prevalent indicator) have a 12.4% probability of exhausting their benefits, compared to almost twice that number (23.5%) for women.

“The research is showing that the cost savings is substantial too,” adds Osofsky, “less and less people are buying unlimited long-term care policies nowadays.”

There is, however, a caveat. “If you do happen to be one of those individuals whose claim extends beyond the actual number of years stated in your policy, you can expect to need care for several additional years,” advises Osofsky, “Even a year of actually needing long-term care but facing such a necessity without coverage in place can be devastating to both lives and legacies. Prior to buying this type of insurance, consumers should be informed of the real risks involved.”

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