How to purchase long-term care insurance now without risking any of your own money.
Updated: Feb 23, 2021
Long-term care (LTC) is a variety of services which help meet both the medical and non-medical needs of people with a chronic illness or disability who cannot care for themselves for long periods. Long term care is focused on individualized and coordinated services that promote independence, maximize patients' quality of life, and meet patients' needs over a period of time.
It is common for long-term care to provide custodial and non-skilled care, such as assisting with normal daily tasks like dressing, bathing, eating, and using the bathroom. Increasingly, long-term care involves providing a level of medical care that requires the expertise of skilled practitioners to address the multiple chronic conditions associated with older populations. A chronic illness may be due to a physical or a severe cognitive impairment like dementia.
A severe cognitive impairment is a loss or deterioration in intellectual capacity or judgement which requires substantial supervision to protect a person and is measurable by clinical evidence and standardized tests that reliably evaluate short and long term memory, orientation as to person, place, or time, deductive or abstract reasoning, and judgement as it relates to safety awareness.
Where You Receive It
Long Term Care can be received in a variety of settings. The large majority of services in the United States are received at Home. This fact alone is the major cause of the severe consequences to families and their finances. Home Health Care services are primarily provided by unpaid family caregivers. Home health care can also be provided by professionals including social workers, homemakers, and home care aides as well as skilled providers like nurses or therapists.
Services provided include assistance with the Activities of Daily Living (ADL's) as well as the Instrumental Activities of Daily Living (IADL).
The ADL's include bathing, dressing, eating, toileting, transferring, and continence. The IADL's may include cooking, cleaning, laundry, bill paying, and transportation.
Adult Day Care Centers are a community based service that can allow the person in need to continue to live at home. This form of care also allows the family members to have a daily respite or enables them to continue working. Similar to a children's day care center, a family member may drop off the patient on the way to work and pick them up on the way home. Assisted Living Facilities primarily provide non-skilled full time care. They generally provide care in a secure environment where residents live in their own apartments. The large majority of care is provided by para-professionals who are trained in assisting residents with their activities of daily living. Skilled Nursing Facilities provide skilled or rehabilitative full time care. These skilled services are provided in more of a hospital-like setting. Each resident may have a private or semi-private room. The facility must have full time nurses on staff to provide the skilled care needed by the residents.
Who Pays For It
Many have discovered that there are only two ways to pay for long term care services; Out of your retirement savings or with private long term care insurance. Most can't depend on the following government programs: Medicare This is an entitlement program that provides health insurance for people age 65 and older. Medicare and health insurance does not cover most long term care expenses. Medicare requires that you need skilled care and that it is rehabilitative in nature.
Most long term care is custodial care which is assistance with your activities of daily living, not skilled care. Medicare also requires that you continue to show improvement and provides services that are rehabilitative in nature. The very definition of a Chronic Illness that requires long term care is that it does not improve. Medicaid This is a Needs Based program with strict financial requirements including asset and income limits. Most of your assets and income must first be spent on your own care until you reach these limits. Once you reach these financial limits set by your state, ($2,000 in assets in most states) Medicaid can pay for your care in a nursing facility. Medicaid generally does not pay for home care. This is not a good planning option for those who do not want to become impoverished if care is needed. Veteran's Benefits The VA does offer veterans some extended-care services in some circumstances. However, access is not universal. Most long-term services (those expected to continue beyond 180 days) are generally available only to veterans who either have severe service-connected disabilities or pass strict means tests on their income and assets.
Services are often not available everywhere, have long waiting lists, or are otherwise difficult to get into. In sum, VA extended care benefits are usually not relevant to any client who was not severely disabled in the line of duty and whose goal is to avoid becoming impoverished if care is needed.
Cost of Care
The cost of care varies based on the care setting, geographic location, and level of care required. Below you will find the national averages by care setting for 2019. These numbers vary greatly by state. Home Health Care The average cost for homemaker services is $4,290 per month. This assumes 44 hours per week of services. Homemaker services include assistance with things like house cleaning, cooking meals, and running errands. The average cost for a home health aide is $4,385 per month.
This assumes 44 hours per week of services. A home health aide provides assistance with your activities of daily living (Bathing, Dressing, Eating, Toileting, Transferring, and Continence). The average cost for skilled nursing care at home is $87.50 per visit. Adult Day Care The average cost for Adult Day Care is $1,625 per month. Assisted Living Facility The average cost for an Assisted Living Facility is $4,051 per month. Skilled Nursing Facility The average cost for a semi-private room in a skilled nursing facility is $7,513 per month. The average cost for a private room is $8,517 per month.
Stand-Alone LTC Insurance Stand-Alone or Traditional LTC Insurance is what most people think of when long term care insurance is discussed. This type of insurance provides only long term care benefits and therefore, will generally provide more benefits than other types of hybrid coverage available in this market. If the policyholder requires long term care services in the future, benefits will be paid to cover those expenses up to the maximum benefits allowable in the policy.
Premiums are generally paid over the lifetime of the policyholder and can be increased by the insurance company. Premiums may be waived when care is received.
Premiums are not returned if care is never needed. This type of coverage is designed to pay a monthly benefit to reimburse the policyholder for qualified long term care expenses when care is needed. Most policies offer between $1,500 - $10,000 per month in benefits. These monthly benefits will be paid until the total maximum benefits purchased in the policy are exhausted. Most policies will offer between $36,000 - $750,00 in total maximum benefits payable. The types of care covered include home health care, adult day care, as well as assisted living and nursing facilities.
PROS & CONS Stand Alone or Traditional Long Term Care Insurance is an excellent solution for those who want to get the most long term care benefits for their money and who are healthy enough to pass the medical standards.
Pros
You will receive the most long term care benefits for your premium initially.
Married individuals will receive premium discounts and can share benefits with their spouse.
You will receive asset protection from your state's Medicaid spend-down requirements if you ever exhaust the benefits in your coverage.
Premiums are waived once you qualify for benefits.
Cons
Premiums are not guaranteed and can rise over time.
If you never need long term care services you will not receive any benefits from your coverage.
You need to meet the medical standards in order to qualify for coverage.
Only qualified long term care services are covered.
Life Insurance with Long Term Care Rider
This type of coverage combines life insurance with long term care insurance.
If the policyholder requires long term care, benefits will be paid to cover the long term care expenses by depleting the death benefit. If care is never needed then the death benefit will be paid in full to the beneficiaries at the time of death.
Because of this dual usage of the death benefit, the policyholder is guaranteed to always get their money back whether they need care or not.
If the death benefit is exhausted to pay for care some policies may provide additional LTC benefits that extend the coverage for a number of years. Premiums can be paid over the policyholder's lifetime or for a more limited period of time like 10 years or even as a single payment..
The premiums are guaranteed and can never be increased by the insurance company. This type of coverage may pay a cash monthly benefit to help with any expenses when care is needed.
A cash monthly benefit is the most flexible type of claims payment and allows the policyholder to use the funds without restriction. The cash payment could be used to pay a family member for assistance, purchase prescription medications, or for help with any other assistance needed. Most policies offer between $1,500 - $12,000 per month in benefits.
These monthly benefits will be paid until the total maximum benefits purchased in the policy are exhausted. Most policies will offer between $100,000 - $1 million in total maximum benefits payable. The types of care covered include home health care, adult day care, as well as assisted living and nursing facilities.
PROS & CONS A Hybrid policy that combines Life Insurance with Long Term Care Insurance is an excellent solution for those who want to guarantee that their premiums will never rise and always get their money back regardless of if they ever need long term care.
Pros
Your premiums are guaranteed to stay level for the life of the coverage.
The death benefit in this coverage will provide a benefit to your heirs if you never need long term care.
You can receive CASH benefits which allow you to use the payments in the policy for anything you want without restriction, even to pay a family member.
You can transfer cash value from old life insurance policies into this type of coverage via a 1035 tax free exchange to help pay your premium.
The application process for this type of coverage may be more simplified than traditional LTC insurance.
Cons
This type of coverage is more expensive than traditional LTC insurance.
Some of these policies do not offer inflation protection.
How to use qualified dollars to protect your retirement from depletion due to long-term care costs.
Many retirees have qualified assets they intend to use for retirement income. But there is
one unknown factor that could unwind the best laid plans — potential long-term care (LTC)
expenses.
One way to help protect your planned retirement income is to insure against the need
to use those funds to pay for LTC expenses. The following strategy carves out a portion of your qualified assets to purchase an IRA annuity. The taxable distribution creates a premium to purchase tax-free LTC coverage1 that can help pay for potential LTC needs that could occur in the future.2
Let’s look at an example
Allyson,3 60 years old, in good health and married – is concerned about LTC after seeing how those expenses impacted her parent’s retirement plans. Allyson’s parents thought they were well set – and were - until care expenses started to deplete their savings.
Allyson’s father passed away first, but his LTC expenses left her mother’s life-style impacted - leaving no extra money for the travel she had hoped to enjoy with friends in her golden years.
Eventually, her mother had five years of LTC expenses of her own, and the money she was hoping to leave to her family was gone. Allyson’s goal is to have a plan that includes LTC coverage.
The strategy
After discussing with her advisor, Allyson decides a hybrid long-term care linked benefit policy from would best fit her needs. Once claims qualifications are met, full LTC benefits are available — without the need to submit bills or receipts.
She likes the flexibility and simplicity the cash indemnity benefits provide. Since some carriers place no restrictions on how LTC benefits can be used, Allyson can use her benefits to pay for a variety of needs that may not be covered by a reimbursement LTC policy, including using her benefits to pay for informal care from an immediate family member or hiring less expensive and potentially more accessible unlicensed caregivers.
Allyson will carve out 10% of her portfolio ($100,000) and transfer it from her 401K plan into a IRA Single Premium Immediate Annuity (SPIA) — which will be set up with a guaranteed 10-year term certain payout. Her annual distribution of $11,0154 will start immediately.
Distributions will be fully taxable as ordinary income because it is coming from an IRA annuity.
The entire $11,015 annual distribution from the SPIA will purchase a hybrid life insurance linked benefit LTC policy with a 10-year annual premium schedule. Allyson has decided to pay taxes due on the distribution out of pocket to preserve more funds for the premium payments. Premiums are guaranteed to remain the same and the policy will be fully paid up in 10 years.
Her annual distribution will be leveraged into a total of $417,836 of tax-free long-term care benefits; and should Allyson pass away without needing her LTC benefits, there is a death benefit of $139,279 that will be paid tax-free to her beneficiaries.
If she passes away before all term-certain annuity payments have been received, any remaining payments will also be paid to beneficiaries (those funds will be taxed at the beneficiary’s ordinary income tax rate).
Should Allyson need to use her LTC benefits, and upon claims qualifications being met, Allyson will receive a monthly tax-free LTC benefit of $5,803 for 6 years ($69,636 annually). Even if all the LTC benefits are used, there is a minimum death benefit guaranteed which would pay a residual death benefit of $27,856.
If you are in good health, we have access to the best top A rated carriers who can provide you with the most benefits to fit your budget and your needs.
At Jennifer Lang Financial Services, we specialize in life insurance backed options to help cover the rising costs of long-term care. If you are 5 - 10 years away from retirement, take advantage of our complimentary consultation today! Click here......
This type of coverage combines an Annuity with long term care insurance. If the policyholder requires long term care, benefits will be paid to cover the long term care expenses by depleting the annuity value on a tax free basis.
If care is never needed then the annuity value will be paid in full to the beneficiaries at the time of death.
Because of this dual usage of the annuity value, the policyholder is guaranteed to always get their money back whether they need care or not. In addition to the annuity value there are additional LTC benefits available to the policyholder if the annuity value is exhausted.
These additional LTC benefits will be two or three times the amount of the annuity value. The premium is paid in a single payment. This type of coverage is designed to pay a monthly benefit to reimburse the policyholder for qualified long term care expenses when care is needed. Most policies offer between $2,000 - $12,000 per month in benefits.
These monthly benefits will be paid until the total maximum benefits purchased in the policy are exhausted. Most policies offer between $50,000 - $1 million in total maximum benefits payable. The types of care covered include home health care, adult day care, as well as assisted living and nursing facilities.
PROS & CONS A Long Term Care Annuity is an excellent solution for those who want to pay their premium in a lump sum and always get their money back regardless of if they ever need long term care.
Pros
The annuity value will provide a benefit to your heirs if you never need long term care.
You can transfer the annuity value from an existing annuity into this type of coverage via a 1035 tax free exchange to pay your premium.
If the gains in the policy are withdrawn to pay for qualified long term care expenses then they will be considered income tax free.
The application process for this type of coverage may be more simplified than traditional LTC insurance.
It may be easier to qualify for this type of coverage.
The LTC benefits can be shared by a couple in a joint annuity contract.
Cons
This type of coverage is more expensive than traditional LTC insurance.
Some of these policies do not offer inflation protection.
This type of coverage must be funded with a single lump sum premium.
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