Long-term care is usually most affordable for the extremely wealthy who have significant resources or the very poor who rely on their state’s Medicaid benefits. However, middle-income people often deplete their savings or sell their homes to cover their care costs.
The following are viable options to help pay for long-term care.
Life insurance riders
Life insurance long-term care riders allow chronically ill policyholders to pay their care costs using a portion of their beneficiaries’ death benefits. A doctor must first certify a policyholder’s inability to perform at least two out of six activities of daily living, including walking, eating, bathing, using a toilet, dressing and getting in and out of bed and chairs.
Long-term care insurance
Long-term care insurance offers the most significant benefits for individuals who purchase policies while they are relatively young and healthy. Otherwise, the costs may be higher, and pre-existing health issues may pose coverage roadblocks. It can be worth looking into long-term care insurance since the cost is affected by other variables, such as the elimination period, the length of the coverage and the daily benefit. Still, this insurance may cover assisted living, nursing home and in-home care.
Homeowners at least 62 years old may qualify for reverse mortgages converting their home’s equity to income. This option may disqualify individuals for Medicaid by increasing their allowable assets beyond the state limit. Also, closing fees and insurance premiums can reduce loan values, forcing heirs to sell the home to pay the mortgage balance.
Deferred or immediate annuity long-term care rider
Deferred annuity long-term care riders allow insurers to invest premium payments in separate brokerage accounts with fixed or variable return rates for policyholders’ future use. However, to qualify for Medicaid, individuals must place their assets in single premium irrevocable annuities for immediate distribution in installments. The remaining balances pay back the state to reimburse Medicaid and any left-over funds may go to named contingent beneficiaries.
Paying for long-term care is something more adults must consider. Although several options are available, pre-need planning is critical for obtaining the most significant benefits and protecting your assets.