Published December 02, 2010
Here are details on three alternative insurance plans to help you pay for your long-term care, according to independent life and health-insurance agent/broker Robert Quinlan.
The New York State Partnership for Long Term Care
This is a plan that provides long-term-care insurance coverage linked with Medicaid coverage. Under the plan, you will be eligible for Medicaid benefits without having to “spend down” your savings/retirement funds for long-term care if you have exhausted the benefits under your Partnership for Long Term Care insurance policy.
The plan covers the same long-term-care services as a regular long term care insurance plan like home care or care in a nursing home. Normally, if you exhaust your regular long-term-care insurance policy’s benefits, you must pay for necessary care using your personal savings. This plan will protect your financial assets if your long-term care needs extend beyond your policy’s lifetime benefits covered in their Partnership policy.
Combined life insurance and long-term care protection that you can pay with an annual premium each year or pay with a lump sum/single premium.
Assume that you want to purchase a permanent life insurance policy, one that provides you cash value such as whole life insurance. You can purchase a rider to the policy (at the time of application) which will pay for long-term care (like home care or care in a nursing home) when you need it. If the rider is not used, then your beneficiary will receive the policy’s face amount. Premiums can be paid each year.
Let’s say, for example, that you are applying for a $500,000 whole-life insurance policy. You add a rider for long-term care that will pay you 2% of the face amount each month when you need long-term care services. Thus, you will have up to $10,000 monthly ($500,000 x 2%) to pay for home-care services or care in a skilled-nursing facility. If you use $200,000 for your long-term care, your beneficiary will receive the balance of the face amount ($300,000) when you die. This rider will make your life insurance policy a “living benefit” as well as provide a benefit to your family when you pass away.
Here is another scenario: Let’s say that you are age 65 today and have $100,000 in a bank CD that is close to maturing. You are concerned that long-term care expenses will be more than you have saved but you are hesitant to commit to pay for a product you may never need.
You use the $100,000 lump sum to purchase a combined life insurance and long-term care policy. It will buy approximately $200,000 of face amount for life insurance protection if you don’t need long-term care and also provide up to $600,000 for your long-term care services. The death benefit will decline if you use the long-term care portion of the policy.
Of course, you must be in good health to qualify for the life insurance policy. And if you change your mind during the first 10 to 15 years of the policy, some carriers will even refund the initial premium (less any long-term care benefits that you received). No regrets!
Beginning this year in the U.S., you can take cash from an existing cash-value life insurance policy or cash from an existing annuity and roll this cash tax free to pay for a new long-term care insurance policy.
An Annuity with a Long-Term Care Rider
You may already have life insurance or may not medically qualify for it. You are in your mid 40’s and want to accumulate more tax-deferred funds for your retirement. You can set up a deferred annuity (either using a lump-sum payment or make periodic payments). You can then add a rider (at the time of application) to the annuity to pay for covered long term care services which will accumulate higher multiples of cash when care is needed and also provide income during your retirement.
Ask your Financial or Legal Advisor about Long-Term Care Protection
Sadly, only 10% of financial advisors are talking to their clients today about long-term care, according to a nationwide survey conducted this spring. This means that you will most likely have to raise the long-term care talk with your advisor. Ask about the type of plan that will best meet your needs and budget.
If your advisor or insurance agent is not familiar with long-term care and long-term care insurance, don’t be afraid to ask for a referral to an insurance agent or broker who is knowledgeable about long-term care insurance and who can help you. This is an important kind of protection to provide you and your family with added financial security and peace of mind in these troubling times. Be proactive. Denial and “I didn’t know” may have painful costs for you and your family later.