Are you prepared to meet future healthcare costs?
Long-term care insurance pays for the care you may need if you are no longer able to care for yourself independently. There are flexible coverage and premium payment options that allow you to tailor the policy and payments to your specific situation. For an additional fee, today's policies offer a variety of optional features that can even include a return of premium rider for unused premium dollars. With people living longer and the cost of care on the rise, these policies offer the financial confidence of knowing you will be able to afford the care you need.
What is Long-Term Care?
Long-term care is a variety of services and support to meet health or personal care needs over an extended period of time. Most long-term care is non-skilled personal care assistance helping perform everyday activities of daily living, such as bathing and dressing.
Long-term care can be:
- Skilled nursing care
- Custodial care to help with the activities of daily living
- Respite services: for caregivers who need a break from daily responsibilities
Types of long-term care policies
Individual (Stand-Alone) Policy
Many long-term care policies are purchased as an individual policy. This type of policy is designed solely and specifically to provide comprehensive coverage for costs associated with long-term care, and provides a pre-determined benefit amount for a pre-determined period of time, as chosen by the individual. Coverage is generally triggered when the insured can no longer perform a given number of activities of daily living unassisted, are diagnosed with a cognitive impairment, such as Alzheimer's, or if they are suddenly forced into a nursing home or assisted care situation by illness or accident. Most stand-alone long-term care policies offer inflation protection so that 20 years down the road, the policy should still adequately cover the rising costs of long-term care. The policy premiums may also be partially tax deductible.
Policy Rider (Hybrid)
Another option for long-term care insurance is to have a rider attached to a life insurance policy that builds a cash value. This type of policy provides for two coverages that a single premium payment is split between. The premium payment pays for the coverage for life insurance and the premium for long-term care coverage. If you need long-term care, a portion of the policy's death benefit is paid out to cover expenses, and the death benefit is reduced by the same amount. If you end up never needing long-term care, the life insurance remains in effect for eventual use by you or your beneficiaries. A Shared Benefits Rider enables a spouse to tap into the other's pool of benefits. As a result, each individual could purchase, say, a three-year plan of protection, which would be significantly less expensive than a five-year benefit for each spouse. Some carriers offer this as a stand-alone policy, as well as a rider.
This is a type of annuity where part of the earnings are used to pay for long-term care premiums without paying a surrender charge that's typically imposed on accelerated withdrawals. A minimum of $50,000 or more is usually required for this type of annuity and earnings that pay long-term care premiums can be tax-free. However, the earning potential of the annuity is decreased because of the inclusion of the long-term care insurance payments. If no care is needed, the annuity gains interest functioning like any other fixed annuity.
Your state may offer this type of policy in conjunction with a carrier to protect your assets should you need care. This type of policy provides the same benefits as an individual stand-alone policy, but has a unique asset protection feature, where it allows you to keep your assets dollar-for-dollar, in case you exhaust all of your insurance benefits and have to turn to Medical Assistance. Protected assets are not considered in determining eligibility for Medical Assistance or estate recovery.
*This content is intended to assist in educating you about insurance generally and not to provide personal service. Guarantees are based on the claims paying ability of the issuing company. Fixed annuities are long-term investment vehicles designed for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on claims paying ability of the issuing company. Withdrawals are made prior to age 59 1/2 are subject to a 10 percent IRS penalty tax and surrender charges may apply.
Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges, and restrictions, and the policy holder should review their contract carefully before purchasing. Long-term care insurance policies contain exclusions and limitations. Eligibility for long-term care and life insurance, additional policy benefits and qualification for benefits is determined on a case-by-case basis. For costs and complete details of coverage, please contact your financial advisor.
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