The Benefits and Drawbacks of Buying an Annuity Doubler to Pay for Long-Term Care

As long-term care insurance premiums keep rising and fewer companies are offering policies, seniors are looking for other ways to help pay for long-term care. Annuity "nursing home doublers" have emerged as a new long-term care option. These doublers can be beneficial, but as with any annuity product, customers should use caution before purchasing.

An annuity is a contract with an insurance company under which the consumer pays the company a certain amount of money and the company sends the consumer a monthly check for the rest of his or her life, or for a certain term. Immediate annuities are a way to receive a guaranteed income for life and can be useful in Medicaid planning. 

Many insurance companies that sell annuities are now offering "nursing home doublers" to help pay for long-term care. If the beneficiary of such an annuity needs long-term care, the insurance company will make double payments for five years or until the annuity's cash value is depleted. To activate the doubler, the annuitant needs to be unable to perform two of six activities of daily living (i.e., eating, bathing, dressing, transferring, toileting, and continence). Once the five years are up and if the annuity still has a cash value, the insurance company would go back to making regular payments.

The benefit of a doubler is that it is relatively inexpensive. Many insurance companies offer the doubler at no additional cost beyond the lifetime income rider fee. If there are additional fees, the fees are usually low. The double payments are not designed to cover the full cost of long-term care, but they can help defray the cost.

Before purchasing an annuity, you should fully research the product. While annuities—particularly immediate annuities--can be a valuable retirement product, annuity salespeople have come under scrutiny for targeting older Americans with deceptive sales tactics. Before purchasing an annuity with a doubler, find out whether it covers home care in addition to nursing home care. In addition, using a doubler depletes the cash value of your policy, which means there would be less left in the annuity to leave to your heirs. Also, if you purchase a joint annuity, the doubler will only cover one spouse's long-term care.

Before making any purchases consult with your elder law attorney to find out the best way to plan for long-term care. 

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