It’s highly probable we will need extra medical care as we age. At some point, we may even need assistance to take proper care of ourselves. This could even result in residing in a health care facility that will provide daily personal care. Prior to arriving at these facilities, the first step to avoid or delay the need for a health care facility may be using in-home care providers. Either solution has a cost, and the cost may be substantial depending on the needed care. Due to the likelihood of need and the substantial cost, many insurance companies offer what is called long-term care insurance or sometimes referred to as LTCI. Most people have some familiarity with LTCI, or at least the concept. In this article, we will provide a brief overview and provide a little more discussion of the legitimate alternatives to long-term care insurance.

*This blog is for educational purposes only and should not be considered legal advice. The use of the Paths Law Firm website does not constitute a client-lawyer relationship.

An Overview Of Long-Term Care Insurance

Long-term care insurance is unique, as its sole purpose is to prepare and provide for the possibility of assisted care or nursing home care. Long-term care insurance will cover many aspects of care, but specifically includes nursing home care costs, personal daycare costs for adults, and home healthcare, when necessary. Of course, no one knows with certainty what the future holds, but making a plan in case it is needed is essential. In fact, planning in advance is a necessary characteristic, as with all insurance; if you need the insurance, it’s too late then to seek it. But, there are alternatives to long-term care insurance that should be considered before purchasing a policy.

Is Long-Term Care Insurance Really Necessary?

This is a question many ask at some point while planning for their own future. It is certainly a legitimate question frequently brought to mind when parents begin to age or a loved one receives a diagnosis bringing an uncertain future with it. Investing in a long-term care insurance policy is always a good idea to discuss with your planning professionals, i.e. financial advisor, accountant, and estate planning attorney. This conversation and planning must be explored before a solution is needed. Part of the discussion should also be the investigation of alternatives to such an insurance policy.

Short-Term Care Insurance

Instead of long-term care insurance, another consideration in the alternative, or as a supplement, is short-term care insurance. Short-term care insurance policies are designed to pay or supplement the costs associated with preventive care, doctor visits, urgent care, and emergency care. Most policies may also cover prescriptions. A short-term care insurance policy may be more affordable, but has limits in time, daily coverage, or total coverage which you should be certain to check. The cost of premiums for coverage will be based on these same criteria. The term for coverage is usually 180 days to one year. Generally, short-term care insurance policies have no elimination period or waiting period, so the benefits start as soon as the policyholder requires care. An elimination period is common with long-term care insurance policies and they are designed to work as a deductible: basically, they are the number of days one must pay for care before the long-term care insurance policy begins coverage. If a policyholder recovers before all benefits are exhausted, future claims may be filed for additional benefits.

Critical Care Or Illness Insurance

Another alternative to long-term care insurance is critical care or critical illness insurance. This type of insurance pays out cash to the policyholder, usually in a one-time lump sum payment in place of receiving monthly benefit payments. This insurance is designed for individuals suffering from serious conditions such as heart attacks, stroke, or diagnosed with cancer. These benefits can last up to a total of six months. In some cases, monthly benefits will be available but not to the degree long-term care insurance will provide.

Annuities With Long-Term Care Riders

Annuities can be taken out as a way of avoiding the need for long-term care insurance. The IRS has made recent changes so money can be invested annuity-like instruments that can be used, along with the long-term care insurance, to provide income for long-term care issues. This strategy allows a steady stream of payments that are released along with the benefits from the insurance policy. This allows the long-term care insurance to be supplemented by personal funds without tying-up all your investments and not requiring the larger long-term care insurance premiums. You may want to coordinate this plan with an Elder Law Attorney and a Medical underwriting company to assist with payment options.

Deferred Annuities For After Retirement

In the same way, annuities can be used along with long-term care insurance, deferred annuities can also be used to a greater degree. These are applicable after a person retires and in most cases, old enough to qualify for Social Security and Medicare. Since this type of investment is not designated for long-term care, it is an option solely for unexpected expenses. Keep in mind, this money cannot be used to cover anything prior to a person retiring from their place of employment.

Asset-Based Policies

In some cases, a person’s assets can also be more heavily relied upon. For example, if an individual has a 401(k) or other investment, these funds can be reallocated and used for the purpose of long-term care. This may be a last resort as this could be the only money an individual has after they retire.  Financial advisors are usually well versed in these options and are legitimate for combining long-term care provisions and investments in general. This too is an option to combine with long-term care insurance and the alternatives to long-term care insurance mentioned. An Elder Law Attorney and the rest of your team can help you determine what options may be best for you in the long run in order to protect your assets and your loved ones.

Investigate and Get Quotes Before You Make a Decision

There will always be insurance companies providing LTC Insurance. The key is knowing what the requirements are to qualify, the benefits available, and what you need, as well as the premiums or other costs. This should all be compared to the alternative options available to help determine what is right for you. If you choose to purchase a long-term care insurance policy, be sure to investigate the companies you are considering and get quotes from several carriers. It is always best to obtain multiple quotes as some carriers may have discounts available based on military status, good health, marital or domestic partner discounts, or discounts based on associations, common employer discounts, and even multi-life discounts. 

Preparation is The Key

Preparing for the future should always involve financial retirement plans, however, many people don’t always think past the idea of relaxing in their golden years. Having a long-term care plan in case of illness can help remove much of the financial stress and burden. Regardless of the type of policy chosen to protect against long-term care costs, just having a plan puts people far ahead of the curve. In the end, it may be critical care insurance, short-term care insurance, or just one of the other options is all that’s needed. Either way, it’s important to look to the future and prepare for what may occur. Preparing for the future is important and should not be something put off. 

At Paths Elder Law, our experts are here to help. We have the experience and knowledge to help. Our Elder Law Expert will work with you to go through all of the available options to create a future plan with your other professionals to meet your estate planning and long-term care needs. We provide legal services to seniors and their families to provide peace of mind and prevent undue financial stress. Contact Paths Law Firm to schedule your consultation. Thoughtful planning today can help secure your future.