Four Questions to Know When Buying Long-term Care Insurance
When it comes to long term-care insurance, policies aren’t one-size-fits-all. You may be interested in a policy that’ll help you cover the care received in a nursing home. You may want a policy that’ll allow you to hire an assistant to help you with your daily tasks. Or, you may not need a policy at all. When deciding how to invest in your future and prepare to meet your health needs, it’s important to understand all of your options in order to make the decision that’s best for you.
What is long-term care?
Long-term care insurance can help offset the costs that come with hiring help. In some cases, tasks like grocery shopping, bathing, getting dressed and taking medications may require some help. It may be necessary to hire a helping hand, or to reach out to loved ones for support with your long-term care needs.
However, keep in mind that this type of insurance can be expensive. The premium you’ll pay depends on factors like your age, current health status and gender.
What types of long-term care insurance plans are there?
If you decide to go with long-term care insurance, the type of policy you pick will depend on your individual situation.
Employer-based long-term care insurance
Your employer may offer a long-term care insurance benefit. If you go with this option, you may have to answer some health questions before applying for coverage. But, it still might be easier to get approved than if you tried to buy the insurance policy on your own.
Partnership programs
There are also partnership programs. These programs are a joint federal-state policy initiative. They were created to expand access to private insurance to help pay for long-term care services. If you buy this type of policy, you’ll be matched one dollar to use towards Medicaid assistance for every dollar of insurance coverage paid on your behalf. But, not every state participates in this program. You can check to see if yours does through AALTCI.org.
Long-term care insurance riders
You may decide to add a long-term care insurance rider to a current policy you have. Some policies, like an Indexed Universal Life Insurance policy, have the option to add a long-term care rider. Adding an LTC Rider to a new indexed universal life insurance policy means you’ll be able to help cover a couple of important needs through a single policy. The life insurance helps protect loved ones with a death benefit, while the rider allows policy owners to use all or a portion of the death benefit early for qualified long-term care expenses, based on the coverage amount chosen.
What are alternatives to long-term care insurance?
Long term care insurance can be expensive, and isn’t necessarily the right choice for everyone. As mentioned above, you can get long-term care riders in addition to a current insurance policy or a new policy you plan to get. There are other alternatives to long-term care insurance, though.
Permanent Life Insurance
Some permanent life insurance policies, such as whole life insurance, may allow you to tap into the cash value of the policy early to use towards long-term care expenses that come up. Or, you may be able to buy a policy that has a combination of life insurance and long-term care benefits.
Annuities
Another option is to invest in an annuity with long-term care insurance benefits. An annuity is usually used as part of a diverse retirement plan. It involves giving a lump sum of money to an insurance company to distribute back to you later as another form of income in retirement. If you select an annuity with long-term care benefits, you’ll receive a stream of monthly income for a specified amount of time from two funds. You’ll use one fund for long-term care costs, and the other however you choose.
But, keep in mind that annuities may not provide enough to cover your long-term needs. Additionally, annuities can affect your taxes. Make sure to speak with a financial advisor or tax professional to learn more about this type of investment.
Health Savings Accounts (HSAs)
If you qualify for a high-deductible health insurance plan through your employer, you may be able to open a health savings account (HSA) to help pay for future long-term care costs. For 2019, you can contribute up to $3,500 as an individual. Or, you can contribute up to $7,000 if you have family coverage.1 These contributions are tax-deductible and are tax-free if withdrawn for qualified health care expenses. This can include long-term care or long-term care insurance premiums.
How much does long-term care insurance cost?
Long-term care insurance costs vary based on a few factors, like your current health status and age. On average, a typical couple where both spouses are age 60 can expect to pay a $3,490 premium per year for a potential benefit of $666,000.2
There are different coverage amounts, as well as various “elimination periods”. The elimination period is the amount of time that you’ll have to pay out-of-pocket for long-term care services before your insurance company starts reimbursing you. A typical elimination period can be anywhere from 30 to 90 days. The insurance company you choose will set the premium price and elimination period, so remember to research different companies to make sure to get the best price and coverage for you.
By researching long-term care insurance and the other options available, you’re already on a great path to protecting your health care in the future! We’re here to help guide you on that path. Contact an agent with any questions you may still have.
SOURCES:
1 IRS.gov. Web page: 26 CFR 601.602: Tax forms and instructions. Retrieved on October 22, 2018, from https://www.irs.gov/pub/irs-drop/rp-18-30.pdf
2 American Association for Long-term Care Insurance (January 2, 2018). Retrieved on October 22, 2018, from http://www.aaltci.org/news/long-term-care-insurance-association-news/long-term-care-insurance-prices-drop-aaltcis-2018-price-index-reports
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