Alternatives To Long Term Care Insurance
Although almost every financial advisor recommends a long-term care insurance policy, that may not be an option for everyone. If you’re on a limited budget or fail to qualify for a LTC policy, here are several alternatives to long term care insurance to consider.
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.
Add a Long Term Care Rider to Life Insurance Policy or Annuity
Many insurance providers offer optional ‘Riders’ that can modify your existing or new life insurance policy or annuity to include long term care coverage. These riders are also considered ‘Living Benefits.’
Here’s how it works, the rider is activated if you cannot perform two of the six daily living activities; eating, bathing, toileting, dressing, eating, and mobility. If you have a life event that prevents you from these daily activities, the rider activates and begins paying out according to your contract’s details. Usually a daily payout amount.
With traditional long term care insurance policies, the benefits expire with the policy. Even if you never use them. However, a long term care rider has dual benefits. If you need long-term care, the rider activates and provides coverage; if the rider is never activated, then the policy returns a death benefit to your beneficiary when you die. Because of this double-sided policy benefit, long term care riders continue to grow in popularity and are a great alternative to long term care insurance.
Consider a Health Savings Account (HSA)
Although the health insurance market is continuously shifting in this country, health savings accounts are a great way to stretch your dollar further.
Health savings accounts are tax-protected vehicles that allow you to pay for medical expenses through tax-deductible contributions. In other words, your dollar goes further due to the tax-advantages of your health savings account. Additionally, most HSA’s allow you to roll over unused funds each year. This also stretches your dollar and reduces your overall out-of-pocket medical costs.
You can enroll in a health savings account through the health insurance marketplace, or if you’re employed, then you may be able to enroll through your employer.
Self Fund Though Personal Savings
If you’ve exhausted the other alternatives to long term care insurance, the last option is to self-fund your medical expenses. Though it may seem impossible, thorough planning and financial discipline provide a route to successfully cash flow your long-term medical expenses.
A study by the U.S. Department of Health and Human Services suggests that setting aside $70,000 of your retirement funds for long-term care expenses should be adequate for most Americans.
To self-fund your future medical expenses, you must thoroughly plan and prepare in advance. Waiting until you need the funds will not work. The key to making this work is harnessing the power of compounding interest.
Albert Einstein famously said: “Compound interest is the 8th wonder of the world.”
If started early enough, a middle-class income can successfully self fund their long term care expenses.
Medicare and Medicaid
When you’ve run out of ways to pay for long term care, turning to the government is the last resort option. Both Medicare and Medicaid provide long term care benefits; however, the benefits are minimal and extremely limited.
Your Medicare Part A includes up to 100 days of in-patient medical care. Though this is minimal, it does provide 3 1/2 months of long term care coverage. However, the majority of long term care services take place within the home. The benefits provide by Medicare Part A are only for serious situations that require admittance into a hospital, care facility, or nursing home. If you need at-home care services, Medicare does not provide any benefits.
Medicaid, on the other hand, does pay for long-term care benefits. However, not everyone qualifies for Medicaid, and it’s not a program that anyone would like to be on. Additionally, not all care facilities take Medicaid patients. You may have to relocate to receive care. If you qualify for Medicaid, the program requires that you spend down all your available assets before the government pays for long term medical care. Typically you cannot have any assets over $2000 to receive benefits. This means no home, no car, or any other sellable asset over $2000. However, if this is your last resort option, Medicaid is an alternative to long term care insurance.
Final Thoughts on Alternatives To Long Term Care Insurance Policies
Finding an alternative to long-term care insurance is possible through the options discussed above. While a traditional LTC policy would be ideal, your finances, health, and age may prevent you from obtaining coverage. You can still protect your health and your bank account by exploring these long-term care alternatives in these instances.
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Our team of independent agents are long-term care insurance experts. We’re here to answer any and all of your questions, provide quotes to compare carriers, and also to help you explore these alternative options discussed in this article.
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