June 24, 2024
Alternative To Long Term Care Insurance

What are alternatives to long-term care insurance?

Alternatives to long-term care insurance range from self-insuring to purchasing a hybrid life and long-term care insurance policy or getting a reverse mortgage on your home.


Self-insuring with a retirement plan or savings account

The most straightforward alternative to long-term care insurance is saving money for future long-term care services. If your budget allows it, you can put aside a percentage of your income into a high-yield savings account or retirement plan. Opening a separate savings account for purpose can help you see how much you’ve set aside for long-term care expenses.


If you have an employer-sponsored retirement plan, like a 401(k) or 403(b), find out if your employer matches contributions. If so, try contributing at least the amount needed to get the maximum employer-match benefit. If you don’t have an employer-sponsored plan, you can open an Individual Retirement Arrangements (IRA) account to set aside tax-deferred savings. You can do this through most major banks and financial institutions.

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The two most common types of IRAs are traditional and Roth IRAs. The table below highlights some of the main differences between the two types of retirement accounts.

Speak to a financial advisor to learn about other retirement plan options and determine which is the best for meeting your savings and long-term care needs.


Although saving enough money to pay for long-term care expenses is doable for some, it’s not realistic for everyone. In 2021, the national median cost of a home health aide was $5,148 per month, and the national median cost of a private room in a nursing home was $9,034 per month. Saving up for these types of expenses requires you to put a significant amount of money into savings after covering everyday living expenses.

Hybrid life and long-term care insurance

Another alternative to traditional long-term care policies are hybrid life and long-term care insurance plans, which many of the best long-term care insurance companies offer. Hybrid policies are generally life insurance plans with built-in long-term care benefits. Many insurers also offer long-term care insurance riders as add-ons to their life insurance products.


Hybrid policies include a death benefit payable to your beneficiaries when you die. If you need long-term care, you can access a portion of the policy’s death benefit to pay for the expenses, and your beneficiaries will receive a reduced amount. If you don’t need to use the long-term care portion of the policy, your family gets the full death benefit.


To be eligible for long-term care funding through a hybrid policy or an LTC rider, a qualified health provider must diagnose you with a chronic illness. You may be considered chronically ill if you have severe cognitive impairment or can’t complete activities of daily living (ADLs) — such as bathing, toileting, dressing and eating — without assistance.


Once you’ve qualified to receive LTC benefits, some policies let you access funds without restrictions on how you spend them. Others only pay or reimburse you for qualified expenses. Policies generally cover care in a variety of settings, including at home, in assisted living facilities, nursing homes or adult daycare centers.

Annuities with long-term care riders

Annuities are yet another alternative to standalone long-term care insurance policies. These products can provide a guaranteed income stream throughout retirement in exchange for an upfront payment. As with permanent life insurance, annuities can be combined with a long-term care rider in order to cover qualifying long-term care expenses. These are often called long-term care annuities.


According to the Administration for Community Living (ACL), there are two main types of long-term care annuities: immediate and deferred annuities.


Immediate long-term care annuities

Immediate long-term care annuities provide a fixed monthly income stream for life or for a set period in return for an upfront premium payment. This option is available to applicants regardless of their health, even if they already require long-term care services. The monthly payment amount will depend on the annuitant’s age, health and initial premium amount.


Deferred long-term care annuities

Deferred long-term care annuities are available to applicants up to age 85 who can meet certain health criteria. Like immediate annuities, you make a single premium payment and receive a fixed monthly income stream for a specified period.

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