The Top Alternatives to Long-Term Care Insurance

July 31, 2019

Preparing for your long-term care needs now can make it easier on your loved ones. Knowing that you have the finances to hire the appropriate care can make it easier to manage your needs as you age. Long-term care insurance covers the necessary assistance to help you with your daily activities such as bathing, eating, and dressing. Traditional medical insurance, including Medicare, doesn’t cover these activities and long-term care insurance premiums can get costly, not to mention the policy is hard to get.

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Luckily, there are several alternatives to long-term care insurance to help you get the assistance you need without financial strain.

Sell Your Life Insurance Policy

If you have a whole life policy, you can sell it at any time. You don’t have to seek approval to use the funds for long-term care – the funds are yours to use as you see fit. When you sell your life insurance policy, an investor purchases the policy for more than the cash surrender value, but less than the death benefit.

Keep in mind that if you sell your life insurance policy, your beneficiaries no longer have a death benefit (if this is your only policy). Before you sell your whole life insurance policy, make sure there’s enough money in other investments/savings for your final arrangements.

Purchase Short-Term Care Insurance

As the name suggests, short-term care insurance offers coverage for daily living assistance for a short period – typically 180 to 360 days. Short-term care insurance doesn’t have waiting periods and it’s often easier to get because of its short term. The premiums are typically lower than long-term care insurance, but you only get coverage for a short period, which can leave you in a difficult situation should you outlive the policy.

Use Accelerated Death Benefits

Some permanent life insurance policies offer accelerated death benefits. This allows you to use your life insurance money while you are still alive. The amount you take out of the policy reduces the death benefit your beneficiaries receive when you die, but it alleviates the financial and physical strain on everyone while providing care for you while you are alive.

Before you assume you can use your accelerated death benefits, though, read the fine print. Many companies have specific requirements you must meet before you can use the accelerated death benefits. For example, some policies require you to have a chronic illness in order to use the benefit. Know the details before choosing a policy.

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Buy an Annuity

You can purchase an annuity with a long-term care rider. Any money you withdraw from the annuity for long-term care can be taken tax-free. There is still an underwriting requirement for the annuity, but it’s not as strict as the underwriting on a long-term care insurance policy.

The downside to the annuity is the upfront investment you must make. Typically, you need at least $50,000 to purchase the annuity. The money will sit in the annuity for a minimum of five years before you can access it. When you need the funds, though, it can provide a monthly stream of income helping you to pay for your long-term care needs.

Purchase a Hybrid Life Insurance Policy

Hybrid life insurance policies combine traditional life insurance with a long-term care rider. The rider allows you to withdraw funds from your death benefit should you be unable to perform daily activities, including eating, dressing, and showering.

The hybrid life insurance policy helps ensure that your beneficiaries will receive your death benefits, should you not need the full amount of the long-term care value. With a long-term care insurance policy, you lose whatever you don’t use, which can be a costly financial mistake.

No one wants to think of the possibility of aging to the point that you can’t care for yourself, but it’s reality. The earlier that you plan for your long-term care, the less expensive it will be and the less stress it will put on your loved ones. Purchasing an insurance policy, other than a long-term care policy can be an option, as can using your investments to cover the cost of long-term care. Putting a plan together now can help you properly prepare for the future.

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