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Shared Long Term Care Insurance Plan Designs: Worth It?

For married couples or partners, the question of whether it makes sense to buy Shared Long Term Care Insurance comes up in every Long Term Care planning discussion. While Shared policies have obvious benefits, the first question is: how much does the shared rider cost? Cost will depend by carrier, your age, state, and health.

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A few Shared Rider cost examples:

For a 55-year old couple buying 5 year/$270k of benefits each, they can combine their policies for $199/year each, or about 15% additional premium. Adding shared to the same policy but with three years coverage is about 17% additional premium. This makes sense because the odds that you’d even stand to gain from having a Shared policy decrease as you buy larger individual pools of money. The sweet spot for this benefit seems to be when added to three, four, and five year benefit multipliers.

How the Shared Rider can work: three methods.

There are several different ways that Shared LTC riders can work to combine the benefits of two pools of money. The best method is a third pool approach, followed by a residual approach, and lastly there is pure Shared coverage where two policies are combined as one.

  1. Third Pool policies basically allow benefits be individually allocated per spouse. For example, each spouse has their own three year benefit period. The Third Pool sits above those two policies and is equal to the same amount of benefits as each person’s individual pool of money. The advantage her is that two plans pools are separate and “fire walled” from each other, while still having access to the third pool in the event of a “circuit breaker” event where LTC is needed for an extended period of time.
  2. Residual Benefits are available with many Genworth Shared LTC policies. What we mean by residual benefits is that the two policies are combined as one, but in the event one spouse uses all of the benefits of the entire policy, the remaining spouse will still have access to 1/2 of the original LTC benefit allocated to them individually. For example, if you had two $180k pools of money combined as a $360,000 benefit Shared and one spouse used all $360,000 of benefits and died, the surviving spouse would not be left with nothing. The survivor would have access to 50% of the original LTC benefit, $90,000 in this example, for care. Be sure to check if your Genworth Shared LTC plan has this feature, as it was added to most policy series starting in 2012.
  3. A Standard Approach to shared plans by most companies is to take the two individual pools of money and combine them should either spouse need Long Term Care for an extended period. With this approach, a spouse is effectively taking benefits from the other spouse, as there is no third pool or residual benefit as described above. With this policy design, one spouse could completely deplete the LTC pool.

Given the differences between various types of Shared LTC plans, it’s practically impossible to compare “apples and apples” which is what we do at LTC Tree. We can compare Shared policies, but you may be looking at very different types of policies depending on the insurer. The cost also varies dramatically from company to company for this benefit.

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