Disadvantages of Long-Term Care Insurance

Long-term care (LTC) insurance has some disadvantages:

1. If you never need the coverage, you’re out-of-pocket for all the premiums you’ve paid.
   
2. There is the possibility of premium increases in some plans (this isn’t an issue in the Federal Long Term Care Insurance Program but could be in other plans). Once you’ve started, you must pay higher premiums or you lose the money you’ve already spent.

Buying a product that combines LTC insurance with another investment can offset some of those negatives. Generally, you can access the cash in the insurance policy or annuity contract if you need long-term care. This is not an option in the FLTCIP, however.

If long-term care isn’t needed, you’ll wind up with a life insurance policy or an annuity. Either way, your investment can be tapped if you need cash or a beneficiary eventually will collect. During your life or after your death, someone will receive benefits.

Premium increases may not be a major concern, either. You usually pay upfront and any ongoing payments typically are fixed so there will never be a premium increase.