Understanding Your Long-Term Care Options

 In Insurance Advice

Long-term healthcare. 

It’s something most people do not want to think about unless and until they absolutely have to.

But here’s the reality: Nearly 70% of 65-year-olds today will eventually need long-term care at some point in the future.1 On top of that, the cost of treating catastrophic illnesses like Alzheimer’s, cancer or a stroke could quickly gobble up your nest egg.2 

So just like with other less-than-pleasant things in life, it’s best to be prepared. 

A personalized long-term care plan can help ensure that your health or personal care needs will be met over an extended period of time. Long-term care may be provided in your own home, in a community setting or in a skilled nursing facility. It can include medical and non-medical care, such as help with activities of daily living (ADLs) like eating and getting dressed.1  

While traditional long-term care insurance remains an option, there are alternatives that may be a better fit for some individuals. It’s important to speak with a qualified insurance professional to help you select the plan that’s best for you.

Long-Term Care Insurance (LTC)

A long-term care insurance policy (LTC) covers benefits not typically covered by health or disability insurance, Medicare or for those ineligible for Medicaid. Services covered by LTC insurance may include nursing home or assisted living care, adult day services, in-home care, home modifications and care coordination.2 

LTC benefits are triggered under two circumstances, as determined by a qualified medical professional. The first would be severe cognitive impairment. The second would be an inability to independently perform two out of six ADLs3: eating, bathing, dressing, toileting, transferring and continence care. Benefits typically start within 30 to 90 days after the need is determined.2  

It’s important to note that some insurers will reject applicants for LTC coverage based on health history, such as a pre-existing illness or disability.4 Even those who do qualify may wish to explore other long-term care planning options.

Short-Term Care Insurance

Short-term care insurance includes many of the same benefits as a long-term policy, except that they are capped at one year. Also called recovery care insurance, this type of coverage may be available to older seniors or other individuals who are ineligible for LTC.5 

Benefits usually kick in immediately for those who need them. If you recover before using up your entire benefit, you may be able to file a subsequent claim in the future. In addition, patients on Medicare may receive up to 20 days of post-hospitalization rehabilitation. If you wait and file your short-term claim after using your 20-day Medicare benefit, you can extend your coverage slightly beyond one year.4 

Life Insurance

A hybrid life-LTC policy lets you access your death benefit while still alive in order to pay for long-term care. If you never need care, your beneficiaries would still get their full payout after you pass away.  

Your insurer would invest your premiums, which are not tax-deductible as with traditional LTC policies. Hybrid policies also tend to be more expensive than conventional LTC coverage.2 Some hybrid plans charge for a rider within your premium, while others deduct a fee from your death benefit if it is utilized for long-term care purposes.5 

Long-Term Care Annuities

A long-term care annuity offers a tax-free way to pay for long-term care. It requires a significant upfront investment along with subsequent monthly payments. Less rigorous underwriting makes it an option for those with health conditions that preclude them from purchasing LTC insurance. Funds can be withdrawn to cover home health care or a stay in a nursing home or assisted living facility. If you end up never needing long-term care, you can redeem the accumulated value of the annuity or leave unused funds to your beneficiaries. 

A deferred annuity is not designed specifically for long-term care. However, it can help ensure a monthly cash flow that can defray the cost of care if needed after retirement. In return for investing money prior to retirement, the insurer promises to pay monthly sums after you reach a certain age. For tax-qualified accounts, you would begin taking required minimum distributions (RMDs) at age 72. For other types of annuities, distributions would be based on specific contract terms.4 

Additional Options

In addition to the methods detailed above, there are several other ways to pay for long-term care if it is ever needed.

  • Specific Trust Planning. Through comprehensive estate planning strategies, there may be ways to position assets to help prepare for care costs. The Resource Center offers free monthly meetings titled “Planning Made Easy.” Click here to RSVP.
  • Critical care coverage. A critical illness or critical care policy helps cover specific catastrophic illnesses, such as cancer, heart attack or stroke. It is often less expensive than LTC insurance.4  
  • Group long-term care coverage. Some individuals may have access to a group long-term care policy through their employers. It can often be accessed by those who are ineligible for individual LTC insurance and is typically affordable for most people.  
  • Health savings accounts. Sometimes called a “health IRA,” an HSA lets you set aside tax-free dollars for future medical costs. It is available to those who are enrolled in eligible high-deductible health plans. 
  • Life plan communities. A life plan community offers independent living apartments, assisted living and nursing or memory care in a single location. After an upfront entry payment that often totals hundreds of thousands of dollars, residents have guaranteed access to care if it is ever needed. 
  • Veterans benefits. The Veterans Administration offers long-term care benefits to veterans with a service-related disability. It is also available to Vietnam veterans who were exposed to Agent Orange and later developed a related health condition. Benefits may also be available to family caregivers.5 

 

Long-term care planning can help ensure that you’ll have access to the care you need while easing the financial burden on yourself and your loved ones. With so many alternatives available, it is recommended that you work with a financial advisor to choose the best plan for your needs.

If you’re ready to get started, please contact The Resource Center today to schedule an appointment.

Sources: 

1: https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html

2: https://www.daveramsey.com/blog/who-needs-long-term-care-insurance

3: https://longtermcare.acl.gov/costs-how-to-pay/what-is-long-term-care-insurance/receiving-long-term-care-insurance-benefits.html 

4: https://www.investopedia.com/articles/personal-finance/100515/4-best-alternatives-longterm-care-insurance.asp 

5: https://money.usnews.com/money/personal-finance/family-finance/articles/the-high-cost-of-long-term-care-insurance-and-what-to-use-instead 

 

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and The Resource Center are not affiliated companies. Living benefits and long term care (LTC) riders are NOT a replacement for LTC insurance. Living benefits and LTC riders are not available on all products and may not be available in all states. Addition of an accelerated death benefit or LTC rider may require an additional fee. Accelerated death benefits and LTC riders are subject to eligibility requirements. Investing involves risk, including the potential loss of principal. Any references to safety, security, and lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. 803194 – 01/21

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