If You Cannot Afford Long Term Care Insurance
Long term care insurance is a great benefit to those who can afford it. It can provide peace of mind and a sense of financial security as part of your overall financial plan. However, for some it may not be feasible to purchase long term care insurance. It is important to recognize this rather than committing to a policy you can’t afford to maintain.
An insurance agent may give you a hard sell in an attempt to scare you into buying long term care insurance. Of course, there are valid reasons to be very concerned about how you will pay for nursing home care or assistance with daily living as you age. But if the cost of a long term care policy will jeopardize your ability to pay your bills or reduce your current living standards substantially, the price you pay for long term care insurance may be too high.
If this is your situation, explore other alternatives. Research whether you may qualify for Medicaid or Veterans Affairs benefits to pay for a portion of your long-term care. Talk with family, friends, and trusted advisors. Take time to do more research and only make a decision about long term care insurance after weighing all your options.
List of Questions to Ask an Insurance Agent Before Buying Long-Term Care Insurance
Can the policy be cancelled, terminated or non-renewed if I decline in health or reach a certain age?
Does the policy cover Alzheimer’s disease? What is excluded?
Does the policy provide inflation protection?
How long has the company been licensed in my state to issue long-term care insurance? Is the insurance company financially viable?
What is the daily, weekly or monthly rate or amount that will be paid to me or a provider of care?
What is the maximum lifetime benefit or total benefit amount under the policy? Is there a limit to the number of years of coverage under the policy?
Will this policy pay for a family member or friend to provide care to me in my home? If so, how much per day will it pay?
How often do I have to pay the premium and in what amounts? How long do I have to be receiving care before future premium payments are waived?
Can the premium amount increase? If so, what limitations or restrictions are there on the amount the premium can be increased?
What conditions do I need to meet for benefits to be paid under the policy?
Will the policy pay any death benefits to my spouse, children or other heirs?
What benefits will be available to me under the policy if I stop paying premiums after five years, ten years, etc.?
Guide to Understanding Long Term Care Insurance
Before making a decision to buy long term care insurance, get a copy of The Consumers' Guide To Long Term Care Insurance. It explains the terminology used in long term care insurance contracts, compares the different options available on such policies, and discusses common limitations and exclusions. This book also outlines the pros and cons of each type of policy so you can make an informed decision.
The Consumers' Guide To Long Term Care Insurance is a very affordable way to get additional information before buying long term care insurance, especially considering the cost of a typical policy. It features a worksheet designed to help with the process of buying long term care insurance. Information on how underwriting and claims are handled is also included.
For more tips on the decision to buy long term care insurance, see Long Term Care Books.
When You Should Not Buy Long-Term Care Insurance
The decision about whether you should purchase a long-term care insurance policy should always be made after receiving guidance from your financial advisor. However, in general, you may want to avoid buying long-term care insurance if:
Paying a long-term care insurance premium will cause you to go without other essentials such as food, housing, transportation, health insurance or providing for your dependents;
You don’t have a steady income and may be unable to make the premium payments on a continuous basis, causing you to let the policy lapse and forfeit the premiums already paid without receiving any benefits;
You are single or widowed, have no children or heirs, and have a small estate and low income, such that you may be eligible for Medicaid; and
You have a large estate, possess adequate savings to pay all estimated long-term care expenses, do not wish to leave an inheritance to a spouse, partner, children or other heirs, and are not concerned about keeping assets available for charitable giving.
Top 5 Reasons to Buy Long Term Care Insurance
To ensure you have the quality of care and living standards you want;
To secure coverage before you have health conditions that cause your application to be declined;
To ease the burden on your spouse, partner, children or friends to care for you and allow you to maintain your independence;
To ensure you can afford the expense of long term care for both you and your spouse or partner; and
To preserve your estate so you can leave an inheritance to your heirs or make a gift to charity.
What Does Long Term Care Insurance Cover?
The types of care covered by a long term care policy vary widely by policy and insurer. Some long term care policies pay for adult day care, in-home health care such as physical therapy and skilled nursing care, hospice care, respite care, nursing home care, and assisted living care.
Some long term care policies pay a daily, weekly or monthly amount to the provider of care or reimburse you for expenses actually incurred. Other types of policies pay you a fixed amount if you meet certain criteria, regardless of the expenses you actually incur. When you buy a long term care policy, you will choose a benefit amount. Before choosing a benefit amount, research the costs per day, week or month for different types of care from home health agencies, adult day care centers, assisted living facilities, and nursing homes in your area. If you want a family member to care for you in your home, discuss with that person the amount they will need to be paid and find an insurance policy which features that benefit.
Long term care policies also have maximum lifetime limits or total plan benefit amounts. These limits can be stated in years, such as one, two, three or more years of coverage. They can also be stated in dollar amounts, such as $1 million. After you exceed these maximum or total benefit amounts, you will no longer be paid any benefits under the policy.
It is extremely difficult to predict the length of time you will need care or how much it will cost. You can review studies and reports that provide information such as the average stay in nursing homes and average costs by state. Examine your own health and your family history when considering the amount of benefits you need to purchase.
Many people fail to buy long term care insurance because they insist they will never go into a nursing home. It is a common misconception that long term care insurance only pays for nursing homes. However, many policies pay for several other types of care, including having someone care for you in your own home. If you want to maintain your independence, long term care insurance can be an important part of your financial plan. To learn about key provisions in your long term care insurance policy, see LTC Policy Fine Print.
Alternatives to Long Term Care Insurance
For many people, the ideal scenario is to own a long term care policy that will cover the lifestyle and type of benefits you want if you require custodial care, skilled nursing home care or assistance with daily living. Nevertheless, if long term care insurance is not an option, there are alternatives.
There are drawbacks and disadvantages to every alternative to long term care insurance. Before relying on any of these options in lieu of purchasing a policy, do your research and talk to your financial advisor.
Alternatives to buying long term care insurance:
Long term care annuities;
Reverse mortgages;
Viatical Settlements, life settlements, and accelerated death benefits from a life insurance policy;
Continuing care retirement communities, called CCRCs;
. It explains the terminology used in long term care insurance contracts, compares the different options available on such policies, and discusses common limitations and exclusions. This book also outlines the pros and cons of each type of policy so you can make an informed decision.