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July 6, 2022
For many, long-term care insurance policies provide a viable way to cover the costs of nursing homes, assisted living, and other forms of care. However, this form of insurance is not the only way to pay for long-term care.
Depending on your financial situation and health, there might be a better alternative to long-term care insurance.
Pro Tip: To learn more about these types of policies, read our guide to long-term care insurance.
While our favorite alternatives to long-term care insurance vary widely in terms of their cost, coverage, and flexibility, one of them might work better for your needs, particularly if you want to avoid costly monthly premiums.
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 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.
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, 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.
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 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.
While long-term care insurance can save you a lot of money in the long run, it’s not a good fit for everyone. Particularly for those who would struggle to afford monthly premiums of $200 or more, it might be worth it to pursue a hybrid life insurance policy.
Alternatively, you might consider checking out our guide to the best affordable long-term care insurance.
To learn more about our favorite long-term care insurance providers, be sure to check out our helpful guides:
Reverse mortgages, deferred lifetime annuities, and hybrid life insurance policies can all help cover the cost of long-term care.
Long-term care insurance premiums are often over $200 per month. Additionally, with many policies, if you never need long-term care, you won’t receive any of your money back.
In general, a reverse mortgage can provide an alternative and consistent stream of income to help pay for long-term care costs; however, this method should be used carefully.
