Alternatives to long-term care insurance
Long-term care insurance isn’t for everyone.
About a third of applicants are rejected, and that number is 40% for people ages 65 to 69, says Tom Beauregard, founder of HCG Secure in Goshen, Connecticut, which develops and sells long- and shortterm care insurance.
“A good percentage are going to get rejected based on medical history, and a good percentage are going to look at the premiums and say, ‘Well, that’s unaffordable,’ ” Beauregard says.
If you don’t qualify for a plan or can’t afford one, here are other options you might explore.
An employer’s group plan. Some employers offer long-term care insurance as an employee benefit. These plans accept people with health conditions even if they were disqualified from buying an individual policy.
Link to an annuity. There are a number of ways to link long-term care to deferred annuities. One way is a deferred fixed annuity with a long-term care insurance rider. With this option, once you demonstrate that you can’t do two of the six activities of daily living, such as bathing or feeding yourself, the rider can be tapped, increasing the annuity payout typically by two to three times, says Marc Glickman, an actuary and chief executive officer of Los Angeles-based BuddyIns, which sells long-term care insurance.
In some cases, depending on the annuity and the type of long-term coverage, you don’t need to qualify for it medically, so this may be a good choice for people with uninsurable chronic illnesses. But you do need a substantial sum of money available to put into the annuity, typically $100,000 or more.
Short-term care insurance. A less expensive option, which is not available in all states, is a short-term plan. It only covers care for a year or less, up to a daily or weekly limit, Glickman says. “The reason people are using it is because they can’t qualify for traditional long-term care, and they’d rather get the first year covered than not have any insurance at all,” he says.
The plans can be a particularly good option for someone who is ineligible for long-term coverage because of poor health, or is age 75 and older or a single woman. Unlike long-term care plans, short-term care insurance does not charge more for women.
Life insurance. Some life insurance policies let you pay for care by tapping the death benefit while you’re alive. A policy with accelerated benefits may limit the amount you can draw down to 70% to 80% of the maximum death benefit, but some companies let you take it all, says Robert Eaton, consulting actuary with Milliman in Tampa, Florida.
Self-fund. On your own or with the help of a financial planner, you could determine how much money to set aside for long-term care in a retirement or investment account.