As long-term care insurance premiums keep rising and fewer companies are offering policies- seniors are looking for other ways to help pay for long-term care. Annuity “nursing home doublers” have emerged as a new long-term care option. These doublers can be beneficial- but as with any annuity product- customers should use caution before purchasing.
An annuity is a contract with an insurance company under which the consumer pays the company a certain amount of money and the company sends the consumer a monthly check for the rest of his or her life- or for a certain term. Immediate annuities are a way to receive a guaranteed income for life and can be useful in Medicaid planning.
Many insurance companies that sell annuities are now offering “nursing home doublers” to help pay for long-term care. If the beneficiary of such an annuity needs long-term care- the insurance company will make double payments for five years or until the annuity’s cash value is depleted. To activate the doubler- the annuitant needs to be unable to perform two of six activities of daily living (i.e.- eating- bathing- dressing- transferring- toileting- and continence). Once the five years are up and if the annuity still has a cash value- the insurance company would go back to making regular payments.
The benefit of a doubler is that it is relatively inexpensive. Many insurance companies offer the doubler at no additional cost beyond the lifetime income rider fee. If there are additional fees- the fees are usually low. The double payments are not designed to cover the full cost of long-term care- but the double payments can help defray the cost.
Before purchasing an annuity- you should fully research the product. While annuities—particularly immediate annuities–can be a valuable retirement product- annuity salespeople have come under scrutiny for targeting older Americans with deceptive sales tactics. Before purchasing an annuity with a doubler- find out whether it covers home care in addition to nursing home care. In addition- using a doubler depletes the cash value of your policy- which means there would be less left in the annuity to leave to your heirs. Also- if you purchase a joint annuity- the doubler will only cover one spouse’s long-term care.
Before making any purchases consult with your elder law attorney to find out the best way to plan for long-term care.