Option 1: Life Insurance with a long-term care rider.
A Life Insurance policy with an accelerated LTC benefit rider may allow for qualified medical expenses to be covered. When you set a policy like this up, the primary reason for doing so is to create a legacy in a tax efficient manner. Based on your age, gender and health condition, your money will be leveraged for a tax-free inheritance to your beneficiaries. A LTC rider may allow you to spend down the inheritance while you are alive for qualified medical needs. These expenses will reduce the legacy protection typically dollar for dollar.
Option 2: Annuity with a long-term care rider.
An annuity with a LTC rider will provide leverage on your investment that will turn into guaranteed income to cover qualified medical expenses. These can generally be placed on a fixed, variable or index annuity where offered.
Option 3: Private insurance.
There are many types of long-term care insurance policies available. They offer a way to pay for long-term care without creating a financial burden for your family or spending down your own savings. While that is a major plus, there are other things to take into consideration. LTC policies are "use or lose it," meaning that the money you pay in annually as premiums is lost if you don't end up using the policy. LTC policies also often don’t kick in until a person has been in a nursing home for more than 90 days and many are capped after a specified time limit has passed, such as 3 years, creating another coverage gap. Finally, the premiums for long-term care policies can be high and continue to increase as the population ages. If you pay $4,000 per year for long-term care insurance for 20 years and don’t use it, that’s $80,000 that could have become part of your estate.
Option 4: Hybrid products.
An alternative to a traditional long-term care policy is a hybrid life/long-term care insurance option. It offers greater financial flexibility. The money you pay into a hybrid policy is there to be used when you need it. If you require long-term care, the policy, in some cases, will pay out 5 to 10 times the amount of the policy in LTC coverage. If you never require long-term care or don’t spend all the money in the policy, the funds will provide a death benefit for your heirs. Instead of losing the money you pay in premiums, the money you pay into a hybrid policy becomes part of your estate, enriching your financial legacy instead of putting it at risk. If you decide to cancel the policy, you have access to the current surrender value. Hybrid policies protect your wealth in two ways: They provide the long-term care coverage you need to protect your estate from uncovered medical expenses, and they serve as a life insurance policy that will provide a benefit to your surviving loved ones.
Do You Qualify?
Obviously, not everyone qualifies for long term care insurance. The insurance companies want to know that you are in good to fair health when you apply for coverage. You can expect to be asked questions that may include medications, physical therapy, surgery, as well as undiagnosed medical conditions.
Next Steps
To explore further, if long term care is right for you, seek professional advice from a representative that is licensed in the state where you live.
