Few financial products are as misunderstood as long-term care health insurance. Such policies can be complex, expensive, and cover problems we’d probably rather not think about; that is, the ailments we’ll encounter far off in our old age. Planning for the health problems of old age, however, is a key part of preparing for your retirement. If you’re in your 50s or 60s, long-term care insurance is something worth considering.
You may well wonder, does affordable life insurance after middle age exist? Well, as long as you’re in good health, the answer is yes. Major health problems – which are more likely in someone’s 50s and 60s than, say, their 30s and 40s – can lead to consumers being priced out of a new policy, or even flat out denied. Therefore, remaining active and maintaining good all-round health are the best ways to prepare for and keep affordable health insurance even if your health declines in later years. This way you’ll leave as many options open as possible.
One such option might be to combine a modest universal life permanent policy with a term insurance rider so you’ll still have the universal life coverage when the term policy expires. That way, you cover your income over the length of the term, and the permanent policy’s ‘cash value’ component allows you to accumulate money for retirement. Additionally, you avoid paying the heftier commission that would come with full-fledged term coverage.
If you have an existing policy, you’ll need to find out if it can be continued into retirement, and, if so, whether this is cost-effective for your personal circumstances. If your health has improved since you took the policy out, it is possible to get your company to change the premium, or else it may be worth getting a new policy altogether.
Before you jettison an existing permanent policy, financial advisor Loretta Nolan suggests this novel twist: Let your adult kids take over the payments. After all, they’re the ones who would ultimately benefit. ‘If you’re widowed or divorced and don’t need the policy but it’s relatively affordable, the children could sort of own the policy and pay the premiums,’ she says.
Insurance adviser Scott Witt says shopping for the right affordable life insurance policy or tweaking an existing one becomes more complicated with the passage of time and circumstances. ‘This is not really a do-it-yourself type of thing,’ he says. ‘These are things that you would need a professional to do correctly.’
The cover you choose has many dependent factors, including the value of your assets, the age at which you wish to retire, the number of dependents you have, your current health and your past or existing health insurance policies. This list is not exhaustive, which means that it’s imperative to obtain professional advice on exactly the right insurance options for you when planning your future in Singapore.
Due to the natural processes of aging, people in their 50s or 60s have different health insurance requirements from those of young singles. As you get older, dental, optical and chiropractic care, for example, are increasingly important areas of cover.
Is a group policy a better deal? If you can buy group coverage through your employer, it may or may not be a better choice than buying on your own. Shop around. Employers rarely help pay premiums for LTC policies, as they do for health insurance, so you’ll pay the full amount either way. Also, unlike health policies, group long-term care rates can be more expensive than individual ones. That’s because group policies often require only limited underwriting and so carry more risk for insurers. On the other hand, if you have health problems, a group policy purchased through your employer may be the best deal available to you.
Do combo products make sense? Some insurers offer annuities or life insurance with a long-term care rider. These so-called combo products, which attempt to add a long-term-care component to an annuity or life insurance, are worth considering, especially if you have a high net worth. They can provide flexibility and assure some income for a surviving spouse if it turns out you don’t need long-term care. However, these policies can be complex and often come with very high fees. Another alternative is longevity insurance—an annuity that pays out only after you turn 85, when you are most likely to need long-term care. In general, basic annuities are a better buy, especially for men, than stand-alone LTC insurance.
What if your insurer folds? There has been tremendous consolidation in the industry over the past decade, and you should consider the possibility that the company you buy from today won’t be around when you go to claim years from now. If your carrier goes out of the business, your policy may be transferred to another firm. In the worst case, many places have special funds to protect you. However, those funds, most likely, have never been stress-tested.
Consider your own situation carefully, and ask yourself exactly what your insurance needs are. Ask yourself why you’re buying coverage. Is it primarily to make sure you and a significant other get good-quality medical care in your old age or, perhaps, to protect your assets for future generations? Pacific Prime Singapore is an insurance intermediary offering unbiased, professional advice on a wide range of insurance options and can help provide you with direction with these types of issues.