Alternatives to Long-Term Care Insurance

Pros and Cons of Long-Term Care Insurance

Deferred lifetime annuities

With annuities, you typically pay a large sum of money that an insurance company invests. From there, you receive a certain amount paid out to you over a designated period of time. A deferred annuity lets your initial investment grow in the market for longer before it is paid out.

A lifetime deferred annuity is when a senior chooses future payments that will cover them for the remainder of their life. It’s a good option for seniors who want to have guaranteed income for retirement or long-term care funds in the future. These types of payments provide an ideal way to pay for long-term care costs.

Typically, you’d be able to select a future date for when you’d like to start receiving the guaranteed income after your first deferred lifetime annuities purchase. Currently, deferred lifetime annuities don’t have any contribution limits.

A hybrid life insurance policy

A hybrid life insurance policy comes with a long-term care rider. Essentially, it’s a combination of both long-term care insurance and life insurance policies. In the event that you pass on and don’t use your long-term care coverage, your beneficiaries will receive guaranteed death benefits.

Home equity

If you currently own your home, it can be a funding source for long-term care expenses. To pay for long-term care expenses, you can take out home equity lines of credit and borrow the amount you need. This means you would be using the equity in your home as collateral to help pay for certain expenses.

Medicaid

Medicaid, a federal and state healthcare program, can help pay for certain institutional long-term care services. It can also help pay for certain costs at residential facilities including nursing homes and skilled nursing facilities. That said, Medicaid likely won’t be able to pay for the entirety of your inpatient care.

Reverse mortgages

A reverse mortgage lets you convert a portion of your home equity into cash without selling your home. This can be a good option for seniors who need assistance paying for retirement expenses or long-term care expenses. Currently, the only reverse mortgage that’s insured by the U.S. Federal Government is the Home Equity Conversion Mortgage, which is available through an FHA-approved lender.

Short-term care insurance

Short-term care insurance functions similarly to long-term care insurance. When care is needed either at home or in a facility, short-term care insurance can be used to cover the cost. The main difference is that this type of policy will only provide coverage for up to one year. While this might not be ideal for someone planning to move to a senior care community, it can certainly come in handy for those recovering from surgery or injury.