Long-Term Care Strategies

A 55-year-old male buying long-term care insurance can expect to pay ~ $2,000 a year for $165,000 in total benefits, including a 3% CPI adjustment rider (source: American Association for Long-Term Care Insurance). New underwriting has become more strict; applicants in their 40s now require blood work, urinalysis, weigh-ins and cognitive tests to look for signs of chronic illnesses or dementia. The result is higher rejection rates.

In 2011, Medicaid paid 62% of the country’s $211 billion total long-term care costs. Family caregivers provided $450 billion in unpaid care in 2009 (source: AARP). Caregivers spend an average of $8,100 per year on out-of-pocket expenses; a third of caregivers provide 30+ hours a week of care (source: Genworth Financial). Listed below are a couple of tactics that may be used to help pay for future long-term care costs:

Asset Protection

More than 30 states are in a federal endorsed program called the Long-Term Care Partnership Program. This program allows people with long-term care needs protection for personal assets worth the amount of the policy. For example, if someone uses $100,000 of a policy’s benefits, that person can keep $100,000 in assets and still qualify for continued coverage. 

Hybrid Coverage

Hybrid coverage involves using a whole life insurance policy that includes a long-term care rider. The hidden costs for these policies can be high and some policies require a large, upfront check from the proposed insured. Observers generally agree hybrid policies work best for people in their 70s.

Universal life policies may include a “life access benefit” that provides up to 2% of the policy’s death benefit each month for long-term care costs. The rider typically adds an additional 10-15% to the policy’s annual premium.