Long Term Care Insurance Alternatives

long term care insurance alternatives

Alternatives to Long-Term Care Insurance

First, we carefully prepare financially for our retirement. And then there’s long term care to plan for. About 70 percent of people turning 65 today will need long term care at some point in the future, according to the U.S. Department of Health and Human services.

Long-term care insurance covers care that isn’t included in standard medical insurance plans, Medicare or Medicaid. Long-term care is generally expensive, but you do have a few other options.

What is Long-Term Care Insurance?

Long-term care insurance covers activities of daily living services, like helping with dressing, eating, bathing, medication management and more. In the meantime, medical expenses are covered by standard health insurance, Medicare and Medicaid.

Most long-term care policies pay for the following services:

  • Nursing homes
  • Assisted living facilities
  • Adult day care centers
  • In-home care

If you have a severe cognitive impairment, such as dementia, or you are unable to handle six activities of daily living long-term care insurance typically pays for care up to the policy’s limits.

Is Long-Term Care Insurance Affordable?

Long-term care insurance can be expensive for some. According to the American Association of Long-Term Care Insurance, the average annual premium for a healthy couple age 55 years is $3,050. Generally, to bring the cost down it’s best to purchase before you turn 60.

Short-term vs. long-term care insurance

 Short-term care insuranceLong-term care insurance
Lower in price
No deductible
Easy to qualify for coverage
Can provide coverage for more than one year
Must meet tougher consumer protection standards set by states                 ✓

Do I Qualify?

Even if you can afford high premiums, companies that offer long-term care insurance can decide to not cover you after looking more closely at your health history. For some people, poor health that might lead to a rejection causes them to look at other options.

Long Term Care Insurance Alternatives

Among the options to long-term care insurance, the most popular include the following:

  • A standard life insurance policy with a long-term care rider
  • Short-term care insurance
  • Critical illness insurance
  • An annuity with a long-term care rider
  • A deferred annuity
  • Accelerated death benefit
  • Accrued savings
  • Family and friends

Life Insurance Policy with a Long-Term Care Rider

A typical life insurance policy with a long-term care rider, or endorsement, allows you to use the death benefit. If you do not use the long-term care insurance benefit, your beneficiaries can receive a life insurance death payout based upon the premiums you paid; traditional long-term care insurance coverage features instead a use-it-or-lose-it feature.

Short-Term Care Insurance

Also called convalescent insurance, short-term care insurance is typically less expensive than traditional long-term care insurance and lasts up to a year. Policies vary, but generally people under 85 to 89 are eligible for short-term care insurance.

Short-term coverage is more likely to accept people who have been turned down for traditional long-term care insurance. With no elimination period, a short-term policy allows benefits to be available immediately.

For those with Medicare, they are able to switch to post-hospital hospital for up to 20 days. This approach lets you get healthcare coverage a little longer when short-term care insurance is used after the 20-day period.

The Annual Median Cost of Long-Term Care Insurance

 Long Term Care ServicesAnnual Median Costs: National (2020)
Homemaker Services$53,768
Home Health Aide$54,912
Adult Day Health Care$19,240
Assisted Living Facility$51,600
Nursing Home Semi-Private Room$93,075
Nursing Home Private Room$105,850

Source: Genworth Cost of Care Survey 2020

Critical Illness and Critical Care Insurance

These two types of coverage offer full cash payments to customers who are diagnosed with a serious illness, such as cancer, heart attack or stroke. Some major insurers offer daily or monthly benefits for both inpatient rehab and on-going care. These coverages can last anywhere from six months to two years.

To be eligible the patient can only seek assistance for a current, not past diagnosis.

Annuity with Long-term Care Rider

An annuity with a long-term care rider is an option for someone who is rejected by standard long-term care insurance providers. Money paid into an annuity with long-term care rider can be a tax-free way to pay for long-term care, providing the insured with monthly payments that can be applied to pay for long-term care.

With this type of option, the rules are less stringent than typical long-term care, so insureds    have more flexibility in how the care benefits are used. When long-term care is not needed ultimately, the accumulated value of the annuity can be redeemed. When the insured passes away, heirs can collect on the funds—less any withdrawals that were made for long-term care.

Deferred Annuity

A deferred annuity is not the same as an annuity with long-term care rider. When deferred, an annuity is not focused only on long-term care. Upon retirement the owner receives a monthly cash flow.

Accelerated Death Benefits

Living benefits, or accelerated death benefits, is usually available on permanent life insurance. Part of the payout can be used to pay for medical expenses like long-term care. The death benefit is reduced by the amount used towards medical expenses.

Accrued Savings

If you have hefty savings or a generous pension, you might be able to pay out of pocket for long-term care. If your savings are depleted because of expensive health care needs, you might qualify for Medicaid, which covers long-term care for low income retirees in most states.

Care from Family and Friends

Many people who are unable to pay for long-term care go the more traditional route and look to family and friends to step in and help by personally providing assistance and care.

Who Needs Long-Term Care Insurance?

Getting long-term care insurance, or an alternative, isn’t just for old age. In fact, about 40 percent of people who need long-term care are ages 18 to 64. It can be needed because of an accident or diagnosis and predicting when one might need it is impossible.

Get started in the planning process by getting quotes online to find the best rates.


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