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Some insurance companies offer payment options in which premiums are paid for
a limited period of time, rather than over the life of the policy.
Rather than paying premiums as long as the policy stays in force, payments
are made for a predetermined number of years or up to a certain age.
Common examples are:
- Single pay - one premium payment
- Ten pay - paying premiums for 10 years
- Twenty pay - paying premiums for 20 years, and
- To age 65 - paying premiums until insured turns 65
You can use cash, certificates of deposit (CDs), annuities, or other resources
to buy a limited pay/long-term care policy. For example, if you purchase a policy
that offers a single premium payment, you are guaranteed that there won't be any
additional premium charges. The policy includes a set amount of money for your
long-term care needs. The longer you have the policy and don't file a claim, the
more money you will have for your future long-term care needs. These policies also
pay a death benefit to your heirs (family or friends).
Listed below are some opportunities and requirements/limits of limited pay/long-term
care policies:
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You can pay for your long-term care needs within a specified shortened period.
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Limited pay options add to the premium amount, sometimes rather significantly.
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Your heirs (family or friends) may get paid a death benefit.
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If you buy a long-term care policy at a young age, your policy may not cover your long-term care needs, as you get older. Make sure your policy will cover your current and future long-term care needs. You should talk with your financial advisor before buying a long-term care policy.
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You might be able to move money from your life insurance policy to this policy without paying any tax penalties. For more information, you should check this out with the Internal Revenue Service (IRS).
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To keep pace with rising long-term care costs, you might need to purchase additional coverage or buy a rider for inflation (future price increases) and have to keep making these additional payments.
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Page Last Updated: July 2, 2007
Source: http://www.medicare.gov/LongTermCare/Static/LimitedPay.asp
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