Removing Shared Benefits on a Long-Term-Care Policy

I’m about to get divorced. A few years ago I purchased a long-term-care policy with a rider that lets me share the benefit period with my husband. Is there any way to detach my coverage from his without losing it altogether? If so, what will happen to my rates?

The rules vary by company, but some of the largest insurers make it easy to drop the rider and continue your separate policies -- and your rates may even decrease.

Many long-term-care insurance companies let you buy “shared-benefit” policies with a spouse or partner. These policies let you share a pool of benefits rather than have two separate benefit periods. For example, if you each buy four-year shared-benefit policies, you have a pool of eight years of benefits that you can use between the two of you. So if one of you needs care for only two years, say, the other will still have six years of benefits left.

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Having shared benefits helps you hedge your bets that you’ll have enough coverage if one spouse needs care for much longer than the other. The average long-term-care insurance claim is about three years, but people who need care beyond that tend to need it for much longer -- sometimes for a decade or more if they have Alzheimer’s.

Adding a shared-benefit rider costs more than having two policies with separate benefit periods, but it often helps people feel more comfortable with buying a shorter benefit period, especially now that most insurers either no longer sell lifetime benefits or have made them extraordinarily expensive. Adding a shared-benefits rider can cost an additional 5% to 22% at Genworth, the largest long-term-care insurer, depending on the policyholders’ ages, the length of the benefit period and the level of inflation protection. Generally, the older the policyholders and the more generous the coverage, the higher the extra cost.

Genworth lets either person request removal of the shared benefits at any time (you don’t need to be officially divorced), but both people must agree to remove the feature. Instead of having a pool of eight years to use between the two of you, then, you’d each end up with a regular four-year policy.

Both Genworth and John Hancock discontinue the extra charge when you discontinue the shared benefit, which may cause your rates to go down by about 10% to 15%. However, neither insurer removes any spousal discount you received when you originally purchased the policy, so you’ll still benefit from that break.

For more information about long-term-care insurance, see Navigate a Course for Long-Term Care.

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As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.