Creative strategies for buying long-term care insurance
The cost of long-term care (LTC) insurance is the price of peace of mind. It’s that simple. The price may be too high for many to pay. But before making that decision, you need to understand some creative strategies for buying LTC insurance that may make it more affordable.
First, a review of the basics. Medicare and supplements do NOT cover custodial care – only a limited period of skilled nursing care after a hospital discharge. Beyond that, if you need help to do basic activities like showering, toileting, dressing and feeding yourself, the money will come out of your savings.
And once you drain your savings, you will be forced to use state Medicaid programs — likely not your choice for how you want to spend your last days. That is why you should at least consider long term care insurance.
Many who purchased these policies years ago have seen premiums rise exorbitantly. But if you’ve paid in for years, it’s better to adjust the coverage than drop it now. And for those who are first considering LTC insurance, there are new approaches that can lock in premiums and coverage for the future.
I’m especially concerned about women growing older alone, without family resources to provide care. So, I’ll direct these examples to their situation.
Combo LTC/life policies: One of the big drawbacks to traditional “annual premium” LTC insurance was the fact that if you died without using the coverage, the money was gone. Now these combo policies offer a life insurance benefit to your heirs, reduced by the amount of care you might use. And you never worry about rising premiums.
Combo policies are typically purchased with one-lump sum deposit — or with a fixed payment every year for 10 years.
For example, a 55-year-old woman could get a guaranteed six years of coverage (with a 3% compound inflation adjustment) giving $3,141/month in care coverage, rising to $7,623/month at age 85.
If she never uses the care, there would be a death benefit of $75,376, reduced by any care used, and a guaranteed minimum residual death benefit of at least $15,000.
The cost of this policy is a one-time deposit of $75,000 – or 10 equal payments of $8,600/year.