What alternatives to Long Term Care Insurance are there besides self-insuring?
Both me and my spouse have chronic health issues (hepatitis C and lupus) that would cause LTC insurance to be unaffordable. We are in our mid to late 50's and I would like to at least partially retire in about 4 years. I have a pension, 401K, IRAs, with a total current net worth over $600K.
Your options will be severely limited since both of you have chronic illnesses. If just one of your had an illness, we could try and plan around it, heavily insure the healthier spouse.
If you are able to get coverage, look into Hybrid Life Insurance with Long Term care benefits (either a rider, or living benefit)
So called Hybrid Polices have been growing in popularity over the past few years. They often package Long Term Care coverage with Life Insurance or sometimes even annuities. I think shoppers are attracted to these policies because they often increase the odds of actually seeing benefits. With LTC, generally it’s use it or lose it. Personally, I’d rather not use it, but I still want a great value from my policy.
If you look at a life insurance policy with living benefits like a LTC rider and the death benefit, the question is whether we get Long Term Care coverage first. They may even include a cash value account which can grow tax free and come out tax free when handled properly. The upside is that life insurance has more protection from premium increases; the downside is you may end up with some extra fees to cover the life insurance cost.
If you aren't eligible for life insurance, then I would look into other options with Annuities that come with some type of additional Long Term Care coverage, that you don't have to go through medical underwriting to obtain.
Best of Luck,
You have several options:
1- There are annuities with Long Term Care (LTC) riders that you can use. The idea is that you fund the account, it grows at a certain rate, and the insurance company promises to pay a multiple of your initial deposit toward LTC expenses. There are too many variations of these to cover here.
2- Life Insurance with LTC rider. You purchase Life Insurance with an ongoing premium or a single premium (you deposit funds once and don't do it again). The Death Benefit, the amount your beneficiary receives when you die, can be used to cover LTC expenses while you're alive. The amount you have access to is restricted to a monthly maximum set by the insurance company. Usually, 2% to 4% of the death benefit per month. So if you purchased a $400,000 life insurance policy, you could get up to $16,000/month to pay for LTC expenses, but that would only last for 25 months. If you only take $8,000/months, then you have 50 months before you run out. Of course, this assumes they allow you to deplete the full amount of the benefit. Some companies restrict it to a percentage of the total and the rest gets paid out to your beneficiaries upon your death. If you never end up going to a LTC facility, then the full Death Benefit gets paid to your beneficiaries.
With both options you don't necessarily have to be in a LTC facility. You can be receiving care at home or an assisted living facility as well.
There are Hybrid Annuities with LTC riders that might be an option. Many Life Insurance companies offer these products. Affordability may still be an issue, but it is another option.