3 Alternatives to Long-Term Care Insurance

November 8, 2017

Long-term care is an unfortunate reality for many seniors. According to the U.S. Department of Health and Human Services, approximately 70 percent of today’s 65-year-olds will need some form of long-term care during their lifetime.1

Long-term care is extended assistance with basic living activities such as eating, bathing, preparing meals, basic mobility and more. It’s often caused by conditions like Alzheimer’s, Parkinson’s, strokes and much more. Long-term care can be provided either in your home or in an assisted living or nursing facility.

As you might imagine, this type of care can be costly. According to a study from Genworth, the average monthly cost of a private room in a nursing home facility in 2016 was more than $7,600. The average monthly costs for in-home care and assisted living facilities each topped $3,500. Remember, long-term care is often needed for months and sometimes even years, so the expenses can add up quickly.2

One potential strategy for managing this cost is long-term care insurance. With long-term care insurance, you pay premiums today, and in exchange, the insurance company pays some or all of your long-term care expenses in the future.

However, there can be challenges with this type of strategy. Depending on your needs and your health, the premiums could be costly. Also, there’s a chance you may never need to use the coverage. Finally, some individuals may not qualify for long-term care insurance because of their age or health.

Fortunately, there are alternatives available if you decide long-term care insurance isn’t right for you. Below are a few other options to consider to help you manage the risk of long-term care in retirement:

Short-Term Care Insurance

Some insurers are now offering a type of policy known as short-term care insurance, which works much the same way as long-term care insurance. The primary difference is that costs are covered only for a limited amount of time, usually no longer than a year.

Since the policy provides a limited amount of coverage, the premiums are usually less expensive than you would find for long-term care insurance. Think of short-term care insurance as a type of catastrophic coverage. You would likely use it near the end of your life, when you need advanced care and support for a serious condition.

LTC/Life Hybrid Policies

One of the most common objections to traditional long-term care insurance is that the premiums could be wasted if the coverage is never needed. Some insurers have developed new types of policies in response to this concern.

For example, you may be able to purchase a policy that’s a hybrid of long-term care insurance and life insurance. If you need long-term care, you simply access the long-term care coverage component in the policy. If you never need long-term care, there’s a death benefit that’s passed on to your loved ones after you pass away. Either way, your premiums aren’t wasted.

Health Savings Accounts

A health savings account (HSA) can be an effective way to pay not only for long-term care costs but for all out-of-pocket health care expenses. If you are still working, you can make tax-deductible contributions to your health savings account today. The contributions can then grow on a tax-deferred basis as long as the funds stay in the account.

When you’re ready to use the funds, you can withdraw them tax-free to pay for qualified medical expenses. Long-term care costs usually qualify as such an expense.

Ready to develop your long-term care funding strategy? Contact us at Grand Canyon Planning Associates today. We can help you analyze your needs and create a plan. Let’s connect soon and start the conversation.