Have you been considering taking the plunge into a long-term care insurance policy? Well, look no further. We have put together a very informative article on the pros and cons of long-term care insurance.
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So sit back, relax, and read on to find out what long-term care insurance is, what your options are, if you really need it and how to get it.
Source: U.S. Department of Health and Human Services
What is Long-Term Care Insurance?
Long-term care insurance is exactly how it sounds, care for your long-term necessities. Long-term care will provide coverages for things like dressing, bathing, eating, and more. It will typically apply to the following care:
- Nursing home care
- In-home care
- Alzheimer’s facilities care
- Respite care
- Hospice care
When Should You Purchase Your Long-Term Care Policy?
The expert opinions vary greatly on this and for good reason. Remember, everybody is different, and as such should be treated as an individual-based decision and not a blanket statement.
Here are some facts to make it a bit more clear on the difference in buying long-term care insurance younger vs. older.
Let’s assume you're 50 years old, healthy, and you just got a quote on a traditional long-term care policy that will cost you around $1,725 annually. Let’s also say you stay healthy and don’t use any of the long-term care benefits up until age 95. You would have spent approximately $77,320 in premiums.
On the flip side, you decide to wait until you are 60 years old, still healthy, and now your estimated annual premium is $2,170. Again, you don’t use your long-term care benefits until you are age 95.
In this scenario, you would have spent approximately $75,320 on premiums. Considering that statistically about 80% of long-term care claims don’t happen until after age 70, you have to ask yourself if you’re willing to take the risk.
The savings are only $2,000 if you wait 10 years and you are taking a chance, a very small 11% chance, by not having coverage for those 10 years. These are all things that should be discussed with your very knowledgeable, very trustworthy, independent insurance agent.
Do You Really Need A Pro/Con List?
If you’ve learned anything from watching American sitcoms, it’s that every great decision has a pro/con list. Your big decisions, like whether to purchase a long-term care policy, should be no different. Let the pro/con list speak for itself:
- You will have peace of mind in knowing your long-term care is paid for should you need it
- You will not have to dip into your retirement savings to pay for your long-term care
- Access to benefits and care when it matters most
- Premiums can be costly
- If you have a traditional long-term care policy, you won’t have a cash value
- If you don’t end up using the benefits, then you paid for a lot of premium likely with nothing in return unless you have a hybrid policy
What about a Hybrid or Traditional Long-Term Care Policy?
Long-term care insurance typically falls into two categories: hybrid long-term care and traditional long-term care. There are various benefits to each, and it’s a big help to know the difference.
In a hybrid long-term care policy, it's what we like to refer to as “linked”. It simply means that the long-term care benefits are “linking” to something like a paid-up life insurance policy or an annuity.
A distinct difference in a hybrid long-term care policy vs. a traditional long-term care policy is a hybrid policy is typically paid in full with one single payment. This isn't always the case and some insurance companies now offer installment plans.
The paid-in-full option can put quite a few people out of the market for a hybrid policy simply because most do not have an additional $50,000-$100,000 or more just sitting in their piggy bank.
A traditional long-term care policy is, well, very traditional like it sounds. You select your benefits, you choose the amount per day that will pay out and the time frame it will pay out for.
A hybrid policy will do this too, except a traditional policy typically does not have a waiting period. A hybrid policy will have a waiting period determined by the carrier and is typically 90 days.
The traditional policy is paid on a monthly, quarterly, semi-annual, or annual basis whereas the hybrid policy is, as we learned, paid all at once one time, most of the time.
Alternatives to Long-Term Care Insurance
So you’ve gone through the pros and the cons and are still a bit unsure which way to go. That’s okay. There are always other options out there too. You may want to consider:
- Living benefits on your life insurance policy. Living benefits are all or a portion of the death benefit that you can you use while, you guessed it, you're living.
- Use a short-term care insurance policy. Short-term care policies can pay in the instance of when short-term care is needed anywhere from a few days to a few months.
- Sell your life insurance policy. You can sell your life insurance policy to another entity or investor. They will then pay the premiums, be the owner of the policy, and receive the death benefit when you pass.
- Use an annuity. An annuity is a form of insurance or investment that would entitle said investor to a series of annual sums of money.
- Save for long-term care. You could simply, but not really so simple for most, save for long-term care expenses on your own. This is cumbersome, most of the time unrealistic, and does not usually grow as fast a instant benefits with a long-term care policy.
The alternatives should be addressed with your independent insurance agent. A good agent will know that there is not a one-size-fits-all solution and what works for others may not be best for your current needs.
If you need a good independent insurance agent, we know thousands and would be happy to make the introduction. All you have to do is ask.
What’s So Great About an Independent Insurance Agent?
It’s simple. Literally. Independent insurance agents simplify the process by shopping and comparing insurance quotes for you. Not only that, they’ll cut the jargon and clarify the fine print so you know exactly what your getting.
Plus, independent agents work for you and not one insurance provider. Actually, they’re the only agents who can check policies from multiple carriers to find the best policy for your unique needs.
But most importantly, they’ll be there to help your family when claim time comes. The outcome of insurance claims can be strongly impacted by how the process is approached and handled.
Getting Insurance Quotes Online
We know what you’re really looking for — fast and easy insurance quotes in 30 seconds or less. We get it, you want the goods ASAP, but choosing speed over accuracy can cause endless rain on your life’s parade.
Robots and algorithms may be quick, but online companies might leave out cost-cutting options or leave in factors that assume higher risk, resulting in a pricier policy.
Not only that, our competitors may sell your info to multiple companies which can result in calls, on calls, on calls. We turned this whole process around and give you the info and options to connect with an independent insurance agent.
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Long Term Care. Gov. October 10th, 2017. Costs & How To Pay. https://longtermcare.acl.gov/costs-how-to-pay/index.html