“Annuity doublers” are being touted as a new alternative to long-term care insurance. But are they a good idea?
Long-term care plans have become much more expensive lately, pricing many older people out of the market. As an alternative, some companies are offering annuities that have a “nursing home doubler.” With this option, the amount of monthly annuity income you would normally receive is doubled during any period you’re in a nursing home, which will help pay for care.
The term “doubler” can be misleading. Some policies only pay 50% extra – although others pay triple. In most cases the extra income lasts for up to five years, or until the annuity’s cash value is exhausted.
The big advantage of doublers is that they’re inexpensive, and in some cases they’re offered free as part of the annuity package.
The low cost makes them attractive to many people, especially compared to the risk of paying high premiums for long-term care insurance and getting nothing in return if the person doesn’t end up in a nursing home.
But there are drawbacks, too. One is that you can’t get an annuity doubler unless you buy an annuity, and annuities don’t make sense for everyone. Indeed, some annuity salespeople have been accused of using deceptive sales tactics in marketing these products to seniors. So you’ll first want to make sure that an annuity is right for your situation.
Keep in mind that if an annuity starts paying double, this will deplete its cash value, and you’ll have less to leave to your heirs. And if you purchase a joint annuity, the doubler will typically only cover one spouse’s care.
More importantly, nursing homes are very expensive, and it’s highly unlikely that a doubler by itself will pay all the costs – which means that all the extra funds it provides will go straight to the nursing home, rather than benefiting your family. There might be other alternatives to paying for long-term care that are more beneficial to you, and it’s worth investigating them with your attorney.