How Much Is A Long
Many people are deterred by the thought of how expensive a long-term care insurance policy might be per month. After all, once you take out a policy, you will be responsible for paying monthly or annual premiums that cover you in the event that you need to pay for some form of long-term care in the future.
The good news is that premiums are often tax deductible just as other unreimbursed medical expenses might be. As long as your long-term care insurance expenses exceed 7.5% of your adjusted gross income, you can deduct these fees from your taxes. Often, the same tax rules apply when it comes to the many alternatives to long-term care insurance, too, like critical care insurance.
Do some research into traditional long-term care policies as well as the alternatives. You may even find that not just one of these solutions is best for you but rather hybrids of multiple options. Meeting with a financial advisor or tax advisor is a good way to figure out what type of long-term care solution is right for you as well as what kinds of tax implications might be involved.
Ultimately, paying for long-term care insurance or one of its alternatives is a smart investment. In doing so, youll be able to prepare for whatever life throws your way and you will be able to age in comfort.
Critical Care/critical Illness Insurance
Another insurance policy thats good to consider is critical care or critical illness insurance. This kind of insurance offers cash payments to people diagnosed with serious illnesses like cancer, Alzheimers disease, or stroke. These can sometimes also provide monthly or daily benefits for continuing care, inpatient rehab, and other services, in addition to lump-sum payments.
These policies usually offer benefits for around six months to several years, and because the coverage periods are again much shorter than those for long-term care insurance, youll likely find that the premiums cost less, too. Plus, these can cover you regardless of your age or status theyre meant to cover people when health problems require expensive treatments or services.
The premiums tend to be affordable. For example, a monthly plan from Guarantee Trust might cost just $110 a month but provide insurance coverage for around $2,000 a month for 24 months. Of course, as with most other kinds of insurance policies, you will need to undergo a thorough health history and exam. Illnesses or injuries that are from the past likely wont be covered. Youll only receive benefits for recent issues that were unknown when you first applied for critical care or critical illness insurance.
Short Term Care Insurance
Short-term care insurance premiums, sometimes referred to as convalescent insurance, offer around $150 per day of healthcare coverage for a year or yes. Obviously, this is not the best kind of insurance to have if you want to be covered for more permanent care or long-lasting living situations.
However, since theres not as much of a time commitment for the insurance companies to adhere to, the premiums tend to cost a lot less. You might find yourself paying less than half of what you would for long-term care insurance.
These policies also tend to have no elimination periods, or very short ones if they have them at all. That way, theres no delay in receiving your benefits. You can often file multiple claims and still receive coverage in the future.
This is a good option for people who are rejected for long-term care insurance due to health reasons again, this can be an issue when it comes to planning for long-term care.
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Rely On Family Members
Like qualifying for Medicaid, this is a common way of handling a long term care need in many households.
Spouses and adult children often provide care.
If this is how you plan on dealing with a potential long term care need, make sure that your family members are fully on board and really assess if it is a realistic solution for everyone involved. There are emotional, financial and practical considerations for those who require the care and those who will give it.
Tap Into ‘living Benefits’ On A Life Insurance Policy
Also known as an accelerated death benefit, this feature is available on most permanent life insurance policies such as whole life insurance. It lets you take a portion of the life insurance payout while youre still alive to pay for medical expenses, including long-term care. The death benefit is reduced by the amount used for long-term care.
Pro: The cost is included in your rates on some life insurance policies, and you can add it for a small cost on others when you buy.
Con: The triggers for when you can access the benefits for care vary by company, so read the fine print carefully. A trigger could be a terminal illness diagnosis. Also, using the policy for long-term care reduces the payout your life insurance beneficiaries will get.
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What Are The Odds Youll Need Long
Well, 9 million Americans over the age of 65 needed assistance in 2012. That number is expected to grow to 12 million in 2020.
68% of adults turning age 65 are expected to need some form of long-term care!
That means the chances are not on your side. Youre probably going to need long-term care coverage of some sort.
When Should I Buy Long
Although people put off purchasing long-term care insurance policies due to the potentially high cost of premiums, long-term care insurance specialist Carol Burk suggests looking into the coverage when you’re in your early fifties.
For couples looking for coverage, the sweet spot is around 55 years old. Beginning to shop at this time increases the odds of buying before your health declines and your premiums rise. The younger and healthier you are, the more likely you are to get the lowest rates.
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Shop & Compare Long Term Care Insurance Policies First
Though this article is about the alternatives to long-term care insurance, we must start this list by reminding people to explore all of their LTC insurance options before writing it off as an option.
There are dozens of LTC insurance providers across the country, and none of them are the same. Each carrier has different premium rates, policy benefits, and policy design options. We strongly suggest exploring all your options here before looking for long term care insurance alternatives.
Coverage Options For Long
- Government programs, such as Medicaid or the Veterans Health Administration
- Traditional long-term care insurance
- Hybrid policies that combine long-term care with life insurance or annuities
- Personal savings
No one really likes to think about needing long-term health care services. But the reality is that in America, someone turning 65 today has almost a 70% chance of needing some type of long-term care in their remaining years to assist with performing everyday tasks like eating or bathing.1 Add the challenges of the COVID-19 pandemic and its easy to see how caregiving can take a financial and emotional toll on everyone in a family.
Are you prepared? According to the Department of Health and Human Services, the average use of long-term care services is 3 years.1
Long-term care expenses are a key risk to your retirement plan, and you need to plan for them. If long-term care is needed, it will affect you and your caregivers financially, physically, and emotionally. Having a plan to address these concerns is critical to easing the burden on you, your family, and your friends. Indeed, 57% of family caregivers have children under the age of 18.2
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How Much Is Long
Before we go into how much a long-term care insurance policy could cost you, its important to put the costs of long-term care itself into perspective, as these are rising exponentially.
Between 2020 and 2021, the average cost of assisted living facilities increased by 4.65%, homemaker services by 10.64% and home health aide services by 12.50%.
Long-term care costs can vary depending on the services provided and where they are rendered, whether in-home, at an assisted living facility or at a nursing home facility.
According to Genworth’s 2021 Cost of Care Survey, the daily median cost for homemaker services is $163, while a home health aide costs $169. Assisted living costs are lower, with a daily average of $78 for adult day care and $148 for assisted living facilities.
Buy A Combination Long
These policies, also called asset-based or hybrid life insurance and long-term care insurance policies, provide a pot of money for long-term care if you need it or a death benefit to your beneficiary if you dont max out the long-term care benefits. Typically you pay one large premium upfront, such as $75,000, or a few large payments over a few years. Under some policies, such as the Lincoln MoneyGuard II from Lincoln Financial, you can get your money back if you decide years later you dont want the policy.
Pro: You get something for your money even if you never use the long-term care portion of the policy. If you dont use it for long-term care, or dont use all of it, your beneficiary gets a life insurance payout when you die.
Con: Its an option only if you have a large sum of money to spend.
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Alternatives To Long Term Care Insurance Made Possible By Congress
The chaos in the traditional Long Term Care Insurance marketplace over the past decade has led many middle-income retirees to essentially throw up their hands and ultimately decide to take their chances not need assistance in their old age.
As a result, Congress passed two laws to encourage alternatives to long term care insurance.
Health Insurance Portability Act
Pension Protection Act of 2006
In 1996, under the Health Insurance Portability and Accountability Act , the federal government set forth the requirements for tax-qualified LTC policies. Until that time, the tax status of benefits paid under LTC policies was uncertain.
- HIPAA provides that, if the policy meets certain triggering events for payment of benefits, then the benefits paid will be received free of income tax. HIPAA also made Hybrid Policies a possibility.
- HIPAA states that life insurance and LTC benefits can be combined in one policy as long as it complies with certain guidelines.
The second law passed to help long term care alternatives become a possibility is the Pension Protection Act.
- The Pension Protection Act of 2006 . The PPA extended the preferential treatment of life insurance LTC combination contracts to deferred annuity LTC combination contracts.
- Withdrawals from traditional deferred fixed annuity contracts are treated LIFO with gains being taxed as ordinary income tax. The PPA of 2006 allows waives income taxes on the gains built up in a non-qualified annuity if used for Long Term Care.
Tapping Into Other Benefits
You may find other benefits from the government or through your community that offer financial help. For example, if you are a veteran, you may be eligible for benefits from Veterans Affairs. It doesn’t hurt to at least check into it.
Local agencies may also help and not just financially. You may be able to get access to a daycare option or free help from a home aide.
There are also many elderly programs and programs for people with lower incomes. These options offer everything from free care to financial assistance.
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Deferred Annuities For After Retirement
Deferred annuities for after retirement work a little differently than annuities with long-term care riders.
Instead of automatically getting monthly payments from your annuity, you can choose what you do with it.
What does a deferred annuity mean for your long-term plans?
- Add Or Withdraw Funds As You See Fit
- Allow Your Account To Grow Until You Need Your Funds
- Use Your Funds For Significant Expenses, Such As Recovery From An Illness
With a deferred annuity, keep in mind that you might have to pay taxes on the amount you save. You may also be able to collect death benefits.
How A 7702 Policy Could Be Better Than Ltc Insurance
The benefits of a 7702 cash value policy versus long-term care insurance include:
- Costs can be significantly less and more in your control.LTC insurance can be expensive, especially if the buyer is older or has experienced certain declines in health.
- You have access to funds if and when needed otherwise, they become an asset to heirs.LTC premiums are comparable to term life premiums. If you dont make a claim, the issuing insurance company generally keeps the premium. Riders providing for some return of the premium are available from some issuers, but they are expensive.
- Loans are tax-free. Generally, all cash value life insurance policies allow the owner to take tax-free loans against the cash value of the policy. If they dont repay the loan by the time the insured dies, they simply deduct the balance from the payable benefit under the plan. There is nothing comparable to this in the typical LTC policy. Of course, if you really need the benefits, then this is not a great option.
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Getting A Reverse Mortgage
A reverse mortgage is a particular type of home equity loan. You must be at least 62 years old to secure one. You also need adequate equity in your home.
You can get the money as a line of credit, monthly payments, or a lump sum. You do not have to repay the loan if you live in your home. If you move or sell, the lender will require repayment or take the money owed off the sales income.
Who Benefits The Most From Long
You might be asking yourself, “should I buy long-term care insurance?” It may be challenging to know if this is the right move because the need for such coverage may seem like it is far into the future.
LTC insurance is a good idea for two groups of people:
- Those who have a lot of assets
- Those who have few assets
People with a lot of assets get LTC insurance to protect those assets. Without insurance, it is possible to have to sell assets to make ends meet and pay for expenses.
People who do not have a lot of money, savings, or assets, including those who may think they can rely on Medicaid, Social Security, or Medicare to afford the costs, need the coverage because otherwise, they will be unable to afford care.
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Reverse Mortgage To Pay For Long
If you have paid off your mortgage, you can take out a reverse mortgage to pay for your long-term care. However, this is a complicated strategy and it is only available as an option for those who are at least 62 years old. If you want to pursue this strategy, make sure to discuss the details with an investment and/or retirement advisor.
Permanent Life Insurance With Chronic Illness Rider
Similar to long-term care rider, chronic illness rider can cover long-term care expenses, although its coverage is triggered only when you are diagnosed with a chronic disease, which means that you are not predicted to recover from. On the other word, you suffer from a permanent condition. Learn more about the differences between a long-term care rider and a chronic illness rider.
Chronic illness rider may be available free or with a charge in the permanent life insurance policies. You have to decide to include it at the point of purchase. You cant add it after the purchase. Here are some popular companies offering chronic illness rider free: American National, United of Omaha, North American, Symetra, Lincoln Financial.
Paid chronic illness rider provides more comprehensive coverage and it may be worth an additional small cost. More companies offer chronic illness rider with an additional fee such as Lincoln Financial, Symetra, Protective, AIG, Prudential, Minnesota Life or Securian Financial, Brighthouse , Cincinnati Life, and Principal.
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Medicaid Helps Those Who Qualify
Medicaid is a joint state and federal program designed to help low-income individuals get the care they need. Not everyone qualifies for Medicaid and most states require you to spend down to $2,000 before the state pays for your care.
Medicaid may be a good alternative for those without income and assets to protect who otherwise couldnt afford insurance coverage or care services on their own. The downside is you have less choice in deciding where you receive care and many state programs have aggressive asset recovery programs to recoup benefits paid for care.
Whats your long term care plan? Whether you choose insurance, self-funding, or relying on your family or the government, its important to make a plan for your future. If youre curious about the cost of long term care insurance or other similar products, discover LTCI rates online with our easy quoting tool and speak with an LTC Specialist for more information.
LTC Consumer is an independent, free online service to help consumers understand what long term care insurance is, how it works, and how to evaluate coverage options. Our mission is to provide an educational, no-pressure resource for learning about long term care planning, with the opportunity to speak with specialists who can help them.
Our Top Picks For The Best Long
- Nationwide: Best for Customer Satisfaction
- J.D. Power Rating
Nationwide is one of the largest insurers in the United States, and was ranked among the best for customer satisfaction in J.D. Powers 2021 U.S. Life Insurance Study. As a well-known national insurer, Nationwide’s reputability adds an extra layer of assurance for customers looking to invest in financially secure products.
Nationwide sells universal life insurance policies with two long-term care options: as an LTC rider and a hybrid policy that includes both life insurance and LTC benefits called CareMatters.
Nationwide policies have some pretty convenient perks. For one, unlike many competitors, once qualified, it doesnt require you to submit receipts and bills monthly in order to get your benefit. You can also use your benefits to pay for care from informal caretakers, such as family members.
Note that coverage depends on your location and the LTC rider isnt available in every state.
- J.D. Power Rating
Mutual of Omaha offers three types of discounts: 15% for partners who purchase the same policy, 15% for being in good health and 5% for married customers . Discounts are stackable, with premium discounts applied to the total premium amount and additional discounts applied to the remainder.
Mutual of Omaha also came in fifth place for customer satisfaction in J.D. Powers 2020 U.S. Life Insurance Study and has a solid financial strength rating of A+.
- J.D. Power Score
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