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Safety Net?

Insurance companies are offering plans that move beyond traditional long-term care. But do they really protect your assets?

This story appears in the May 2005 issue of Entrepreneur. Subscribe »

The glory days of long-term-care insurance--designed to protect you from the cost of late-in-life health problems--may be a thing of the past. Insurers have hiked up premiums for many policyholders in the past 18 months, half a dozen companies stopped selling new policies, and at least two exited the business entirely. Still, some companies are happy to sell traditional policies if you're willing to pay the freight, and an increasing number of insurers are mixing and matching long-term-care coverage with other financial products to provide new options.

The most common of the new twists involves long-term-care coverage with life or disability insurance. Variations are all over the map, but a simple example might involve a $500,000 life insurance policy with supplemental long-term-care benefits. If you die without needing long-term care, then your estate gets the full $500,000. But if you were to spend $100,000 for long-term care in the final year of life, the death benefit would drop to $400,000.

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