insurance

Financial planning for a chronic illness

If you need to buy a private plan, what should you look for? Johnson regrets a missed opportunity: "I was naive back then because I never expected I'd really use it," he says. "For only a small amount more, I could have gotten a cost-of-living rider that would make my benefits much better now."

Schefers agrees about the benefits of the cost-of-living, or inflation, rider. He also recommends getting a policy with a "residual rider," which ensures you'll get some benefits if you can still work, but less than you used to. "Some plans don't account for partial disability," he says. "But if your family is counting on you to have a full-time income, and you're only able to work part time for an extended period, you're going to need something to help make up the difference."

Long-term care insurance

Elfenbein's main concern for his senior clients is how to keep their retirement savings from being eroded if they become ill. One of the main ways to do that, he says, is through long-term care insurance, or LTCI. "Long-term care insurance is a great idea," he says, "but by the time most people realize that, they're either too old to afford it or they can't qualify."

Not everyone agrees about what's the right age to buy LTCI, but it's most common to purchase it when people are in their 50s. "People think about long-term care insurance in terms of getting Alzheimer's or breaking a hip," Elfenbein says. "But half of all long-term care insurance is used by people under 65."

Again, Schefers advises most clients to buy a cost-of-living rider. "If you're 80, you don't need the rider," he says. "But if you're the average purchaser, 57 or thereabouts, you may not use the coverage until 10 years or more in the future. If the cost of care goes up 5 percent per year, you're not purchasing as much coverage as you thought."

Elfenbein particularly likes hybrid products that combine long-term care with an income annuity or a single-premium life insurance policy. In effect, he says, these provide you with LTCI coverage for free. For example, certain annuities will double or triple your regular payout if you end up needing long-term care, and some life insurance policies allow you to accelerate the death benefit to help pay for care if you need it.

It's best to think about the unthinkable when you're well and put some protections in place for yourself and your family. Chronic illness is enough to deal with on its own; you don't need the added stress of facing financial peril.

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