(FinancialHealth.net) – Long-term care insurance helps pay for services so individuals can meet their ADLs or activities of daily living. This could be in a nursing facility or in the comfort of home. The main issue with many long-term care policies is they have restrictions and can be costly over time. What are some alternatives? Read more and discover other options that apply to every personal situation and budget.
Short-Term Care Insurance
A drawback to long-term care insurance is the policy limit. No matter how old an individual is when they start paying for the policy, there are often limits on how long the policy can be used for once in use. This is typically only two to four years and often caps out at a certain limit. Having a short-term care insurance policy in place can provide a gap or bridge between care. It can be a cost-effective addition to long-term care insurance. Another plus is qualifying is generally easier than for long-term care. Just answer a few medical questions and pay the monthly premium.
Critical Care Insurance
Critical care or illness insurance helps offset costs due to an illness. It can be used along with long-term care insurance or as a fill-in to help with medical bills and services. For example, individuals with coverage for nursing home or home health care services that can’t work may have difficulty paying household bills. Critical care insurance pays for services the medical or long-term insurance doesn’t pick up or can be applied toward things like a mortgage payment.
Deferred Fixed Annuity
Choosing an annuity to save for future medical bills is an alternative to long-term care insurance. It’s a type of savings account through an insurance company where individuals make payments that in turn accumulate interest for future gain. Types are either immediate or deferred and include fixed or variable rates.
A deferred fixed annuity can be used for more than just long-term care expenses. It can also serve as a life insurance policy, in case it was never used or needed for medical care. Most long-term care insurance policies can’t be transferred, and if they are not used, they can’t be cashed out.
Asset-Based Long-Term Care
Asset-based long-term care plans are linked-benefit policies. They start with an annuity or life insurance policy. Using the equity value in existing policies can help pay for long-term care needs like nursing home care not covered by health insurance.
Premium funds that go unused can be payable to a beneficiary. Here are some other benefits:
- Premiums can be paid either by lump sum or over time making them budget friendly
- There is often a trade-in cash value to pay premiums of another policy
- Protection from rate increases
- Transfer funds from an IRA to the policy or a long-term care insurance policy
Withdrawing funds from an asset-based long-term care plan are federal income tax-free. This makes this route beneficial for those looking to pay for long-term care.
Points to Ponder
- Adding a hybrid policy option to long-term care insurance can be an alternative to a standard policy. It provides a cash value to the policy for beneficiaries or other uses rather than long-term care.
- No long-term care insurance? One option is to spend down assets to gain Medicaid approval if the individual financially qualifies.
The demand for long-term care insurance is going down due to costly premiums and minimal coverage. Finding alternatives is cost effective and can bring peace of mind for the future.
~Here’s to Your Financial Health!
Copyright 2020, FinancialHealth.net