Report: Reverse mortgages may not be the answer for long-term care

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Linking reverse mortgages with long-term care insurance may not be the answer to solve financial crises, a new report released by Health Strategies, Inc. says.

The Pew Charitable Trusts funded the Retirement Security Project in response to a policy passed in 2000 by the Department of Housing and Urban Development. The policy says homeowners will have incentives to use reverse mortgages to finance long-term care insurance. The report is part of a series to educate consumers and policymakers the policy's weaknesses.

 

"Our analysis indicates that this policy will not be effective in moving substantial numbers of people to purchase LTC insurance, and we are concerned that this linkage may not be appropriate for many people," the report says.

 

Under the policy, in order for consumers to get the insurance premium waived, reverse mortgage loan proceeds can only be used to purchase long-term care insurance. Homeowners may not use home equity to pay long-term care costs that exceed those covered by their insurance policies. The report points out that counseling for the policy is not yet available. It also contends that long-term care insurance policies need to have protections, such as against medical inflation.

 

Regulations for the policy are expected to come out in the next few weeks.

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