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The rising costs of long-term care have become a pressing concern for many Americans, with nursing home costs averaging more than $120,000 per year for a private room and home care costs rising steadily—and those costs are expected to rise over time only increase. While long-term care insurancethat covers the high costs associated with long-term care, such as nursing home stays, home care or assisted living facilities, remains a popular solution to control these expenses, qualifying can be a challenge.
For the millions of Americans who do not qualify for traditional long-term care insurance due to pre-existing conditions, age restrictions or other health factors that make them uninsurable, the prospect of financing future care needs can seem daunting. Recent data show that approximately 70% of people over 65 will need some form of long-term care during their lifetime. That makes it crucial to have a financial strategy in place, regardless of whether traditional insurance is an option or not.
Fortunately, several alternatives to financing exist long-term care costs and can provide viable pathways to ensure adequate healthcare coverage. By understanding and leveraging these strategies, you can create a plan to meet your unique needs and protect your financial future.
Find out what your long-term care coverage options are now.
5 Alternatives to Long Term Care Insurance to Consider
If your application for long-term care insurance is denied, these alternatives may be helpful:
Life insurance with long-term care riders
Life insurance with long-term care riders combine two types of protection: a death benefit for your beneficiaries and long-term care funds as needed. If you need care, you can access some of the policy’s death benefit to cover costs. If you don’t end up using the money, your beneficiaries will still receive the full or reduced death benefit.
This option is especially attractive to people who cannot qualify for standalone long-term care insurance but can still purchase life insurance. While this policy Often involving higher premiums than basic life insurance, they offer flexibility and peace of mind. Some policies also do not require strict health qualifications.
Apply for long-term care insurance today.
Health savings accounts
Health Savings Accounts (HSAs) are a tax-advantaged option to save for medical and long-term care costs. If you have high-deductible health insurance, you are eligible to contribute to an HSA. Contributions are tax-deductible, the money grows tax-free, and withdrawals used for qualified medical expenses – such as home care or nursing care – are also tax-free, and if you’re denied long-term care insurance, an HSA can do that. serve as a supplementary fund for healthcare-related costs.
HSAs are particularly effective for this purpose if you start saving early. The annual contribution limits ($4,150 for individuals and $8,300 for families in 2024, with additional catch-up contributions for those over 55) may seem modest, but over time the tax benefits and compound growth can add up significantly.
Annuities with long-term care benefits
Annuities can be a useful tool for financing long-term care, especially for those who do not qualify for long-term care insurance. These financial products include making an advance payment to an insurer in exchange for guaranteed income payments, often for life. Some annuities, known as hybrid annuities or long-term care annuities, also include specific riders that increase payouts or provide additional funds if the funds are used for qualifying healthcare expenses.
One of the main advantages of these annuities is that they often require less stringent medical underwriting compared to long-term care insurance, making them accessible to people with certain health conditions. However, they do require a significant upfront investment, and withdrawing funds early may result in penalties or reduced benefits.
View your annuity options online for more information.
Medicaid planning
Medicaid is a government program that can cover long-term care for people with limited income and assets. Although it is often considered a last resort, it can be an essential safety net for those who cannot get private coverage. However, to qualify for Medicaid, strict financial criteria must be met, including limits on income and assets.
To strategically plan for Medicaid eligibility, consider working with an elder law attorney or financial planner. They may be able to help you legally structure your assets to meet Medicaid requirements without sacrificing your financial security. However, Medicaid planning requires foresight as many states enforce a “lookback period” to prevent abuse.
Family Care Agreements
Family members often step in to provide care for aging loved ones formalizing this arrangement can be mutually beneficial. A family care agreement is a legal contract that establishes the terms and conditions for care provided by family members. This arrangement can be cheaper than professional care and ensures your needs are met by people you trust.
To draft a family care agreement, it is best to contact an attorney with experience in elder law. The agreement should specify the caregiver’s responsibilities, hours, and payment terms to avoid misunderstandings. While this option requires careful communication between family members, it can create a collaborative, personalized care plan that meets everyone’s expectations.
The bottom line
Planning for long-term care can be overwhelming, especially when traditional insurance is not an option. However, by exploring these alternatives, you can develop a comprehensive strategy tailored to your needs and circumstances. Proactively addressing potential healthcare costs will not only secure your financial future, but also provide peace of mind for you and your loved ones.
