Divorce may spur need for long-term care insurance

The economy may not be the only thing in recovery this year: The number of divorces in the United States also is expected to rise, according to the American Academy of Matrimonial Lawyers.

After falling in the recession years of 2008 and 2009, divorces rates started climbing toward the end of 2010. With economic fears subsiding somewhat, a growing number of couples who stayed together during the recession for financial reasons are now carrying out plans to split.

For couples who are divorcing or already have broken up, especially those in the 40-60 age group, long-term care insurance may be an option worth investigating. “From the planning point of view – especially post-divorce planning – considering long-term care insurance is essential,” says Denisa Tova, a certified financial planner in Colorado. “You’re both single now, and it’s smart to secure a (long-term care) policy.”

long term care insurance divorce

Let's start with a brief overview of what long-term insurance involves.

Care options. Long-term care insurance is designed to cover medical costs often not covered by traditional health insurance or Medicare. It may be used to help pay for home health aides, assisted living expenses or nursing home care.

Cost. Premiums for long-term care insurance vary greatly, depending on factors such as your age, your health and how much coverage you want. “Generally speaking, if your average income is $75,000 or more, long-term care insurance is an affordable option that could be worked into your budget,” says Jerri Lynn Romley, a long-term care insurance agent in Newport Beach, Calif.

Daily benefits. Benefits of long-term care insurance often are listed by dollar amounts, according to Romley. In California, for instance, a policyholder may be able to get between $50 to $400 a day in long-term care coverage. This figure varies from state to state.

Insurance companies offer policies for married couples and individuals, but the benefits may have more of an effect for those living on their own. Because of the loss of a built-in care provider, “long-term care planning is more important for people who are divorced than married couples,” says Jesse Slome, executive director of the American Association for Long-Term Care Insurance.

Individuals who are considering the purchase of a long-term care insurance policy should do a cost-benefit analysis before signing on the dotted line, says Katherine Ashley, a certified divorce financial analyst in Jacksonville, Fla.

If you're going through a divorce, here are five things to ponder before taking out a long-term care insurance policy:

1. Consider caretakers. While married couples have built-in care providers, divorced individuals do not. You’ll want to consider your new support network: Do you have a child, relative or friend that can take care of you if, for instance, you were diagnosed with Alzheimer's disease? If so, you’ll need to weigh whether they (or you) have enough money to cover medical costs. “For those getting divorced who don’t have a support network, long-term care is a good option to look into,” Ashley says.

2. Go over finances. Divorce can modify your financial situation significantly, and you may have certain assets you want to protect. “Long-term care insurance can cover expenses so you don’t have to take (money) from savings,” Romley says.

3. Prepare for the unexpected. Financial planning is not just about accumulating assets, it’s about contingency planning, Tova says. You may be in perfect health now, but taking out a policy will ensure your long-term care needs are covered at a time when you may not be able to make health care decisions.

4. Balance the books. A long-term care insurance policy should cover your needs and fit into your budget, Tova says. If you’re unsure of where that happy medium should be, sit down with an adviser who can help you decide whether setting aside personal funds, getting a long-term care policy or a combination of the two is right for you.

5. Do a health check. In most cases, the earlier you take out a long-term care policy, the better. “You have to be healthy to get it, and the costs generally don’t go up over the years,” Romley says. Generally, the younger you are when you take out a long-term care policy, the lower the premiums will be. Also, if you wait until you're in poor health (you've been diagnosed with Alzheimer's disease or Parkinson's disease, for instance), you may not be approved for a policy. Premiums are paid until the coverage is needed; at that time, the payments are waived and the benefits are distributed.

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