A report from the Henry J. Kaiser Foundation indicates that over five million people ages need some type of long-term care. The latest data from the National Center for Health Statistics for reported that roughly , of the people living in nursing homes were under age 65 nearly 10 percent of the total.
Of those receiving home health care services, roughly , were under 65 about 30 percent of the total. Pro: A hybrid policy might allow you to pay a family member who provides care for you, Dona says. If it uses an indemnity model that pays cash rather than reimbursement for the actual cost of care, you could use that cash to pay a family caregiver.
Pro: Permanent life insurance policies build cash value, which you can tap to cover expenses other than long-term care. Con: Hybrid policies have limited ability to be customized for individual needs, Voegele says. For example, the period you must wait before benefits kick in is typically 90 days with hybrid policies. Traditional plans can have elimination periods that range from 30 days to two years, he says. A longer period can lower the premium. Con: Long-term care payouts can substantially reduce cash value or the death benefit of a hybrid policy.
If you bought the policy because you have loved ones who will need the death benefit, that benefit might not be there when they need it. This option increases the cost of a policy, but it allows the value of the policy to increase with the rising cost of long-term care.
Con: The tax benefits of hybrid policies might not be as generous. Both hybrid and traditional long-term care insurance payouts are tax-free. Con: Traditional long-term care policies often are eligible to be part of state Medicaid partnership programs. Hybrid policies are not eligible for these partnership programs, Roers says.
Lincoln Financial Group and OneAmerica are the top two providers of hybrid life insurance policies, Dona says. Other insurance companies that sell this type of coverage include Nationwide, Pacific Life and Securian Financial. Most people who buy stand-alone long-term care coverage tend to be in their early 50s. Those who buy hybrid policies tend to be older, Dona says. Some hybrid life insurance carriers will even issue policies to people up to age Older adults are more likely to have that sort of cash in savings or an annuity.
The insurer might check your medical records and prescription history, and might require a life insurance medical exam , Dona says. If your health is an issue, you might be able to buy an annuity with a long-term care benefit because you will only have to answer a series of questions. This option does not include a death benefit, though. However, hybrid policies can be cheaper for women, Dona says. Men pay more because the life insurance component is more expensive for them. The following sample premiums provided by Newman Long Term Care are for a couple age 55 in good health.
You must qualify health-wise for the new policy, and you must have built up enough cash value in the existing policy to fund the new policy. You also could use a cash value life insurance policy to pay for long-term care. You can take a loan, withdraw cash or fully surrender the policy for the cash value. Be careful because the payout might be taxable. The payout might be taxable, and it will reduce the death benefit that your beneficiaries receive.
Before you use any of these strategies, read the fine print of your insurance policy. Sweeney recommends talking to your insurance agent to understand the implications and review the downsides. Cameron Huddleston is an award-winning journalist with nearly 20 years of experience writing about personal finance. Follow me on Twitter CHLebedinsky. Select Region. United States. Also, the study concluded that nursing home stays are shorter than previously believed: 10 months for the typical single man and 16 months for a woman.
How many years should you insure for? What are the advantages and disadvantages to insuring for longer and shorter periods? Usually, two to four years is a good ballpark; three years is about average. The longer the benefit period the policy offers and the higher the policy benefit amount, the higher the cost to the policy buyer. So, it is a trade-off between accumulating and using the benefits and not using them at all.
Essentially, the longer the benefit period that the LTC policy offers, the higher the risk the client might end up paying thousands of dollars in premiums and getting nothing in return. Many insurance companies increase premiums, and you have no idea if or when this may happen. However, like other insurance such as homeowners, you may be paying for peace of mind but never have to claim on it.
Clients who cannot afford to self-insure currently because they do not have enough assets accumulated may be able to buy a LTC policy during their earlier years. As time progresses, there may be a point where their assets can support a long-term care event — and at this point, they can terminate their policy or modify it for less coverage.
A cash plan has more flexibility, because you are paid a cash benefit equaling the entire daily benefit, vs. A reimbursement policy will only pay the full daily benefit when the actual cost of care is greater than or equal to the daily benefit. Policies with a cash benefit are more expensive. However, if you have a cash plan, you have the option of paying a relative or friend to care for you.
If you do go into care and come out, does the policy reset, or do the benefits paid reduce the benefit available for the next occurrence? Some policies have a restoration of benefits rider, which increases the total amount of care your policy will cover.
If you go into care and recover, the benefit will reset to the maximum amount as if you never used it. Are there any policies with compound interest available, and if so, what do they cost? Compound interest policies have better inflation protection but may have higher premiums. Depending on the policy and the rate, simple interest may be a better option over the long term as the breakeven point may not occur until later.
Inflation is compounded, but if the LTC policy uses simple interest, at a certain point inflation overcomes the simple interest and the policy pays for less than the actual costs. The shorter the period, the more expensive the rider.
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