As we mentioned in our blog, Overcoming The Obstacles When Moving Into A Senior Living Facility, paying for long term care is one of the major obstacles for many older adults
and their families. Just as there are several
kinds of long term care options, there are several ways to pay for them.
Long
Term Care Insurance
The numbers suggest that only 7% of the
senior population carries long term care insurance. Long-term care insurance
policies reimburse policyholders a daily amount for the services necessary to
support their activities
of daily living; feeding, bathing, walking and
grooming. Policy holders can choose from a variety of care options and benefits
in order to receive services they believe they will need. The cost of a policy
will depend on several components, such as your age at the time of purchase,
the total number of years you will receive coverage, the number of days per
year you will receive coverage and the amount of coverage per day. Each company
offers a variety of coverage amounts and care options, all of which impact the
total cost.
Individuals who are already in poor
health often do not qualify for coverage, may only qualify for limited coverage,
or have to pay higher rates. For this
reason, it is important to plan ahead. In the last few years, many companies have
moved to gender specific rates. Women now pay approximately 50% more than men
because women tend to generate more long-term care claims than men, and their
claims tend to be more expensive. Married women may be able to save by
purchasing with a spouse and working women may benefit from employer programs.
One way to find out which insurance companies offer
long-term care coverage in your state is to contact your state’s Department
of Insurance.
Life
Insurance
Life insurance policies can also
be used to pay for care. There are several
options including Life Settlements, Combination Products and Accelerated Death
Benefits.
In a Life Settlement, you would
sell your life insurance policy
for its present value to raise cash for any reason, including paying for long
term care services. Policy holders do not have to be in good health to sell
their policy, but need to be aware that proceeds of the sale may be taxed. This
option usually has age restrictions of 70 and over for men and 74 and over for
women.
A Combination product is usually
offered by life insurance with long-term care insurance. The amount of
the long-term care benefit is usually a percentage of the life insurance
benefit.
An Accelerated Death Benefit
(ABD) feature may be included in some life insurance policies, though typically
requires an extra premium. The ADB
allows you to receive a tax-free
advance on your life insurance death benefit while you are still alive.
There are different types of
ADBs, each of which provides a cash advance for a variety of reasons, such as if you are terminally ill, have a
life-threatening diagnosis or are permanently confined to a nursing home.
If you receive payments from an
ADB policy while you are alive, the amount you receive is deducted from the
amount of death benefit that would be paid to your beneficiaries.
In all cases above, it is recommended
you get price quotes from several insurers and consult with professionals
before making decisions.
Private
Pay
If you have enough savings, you will pay for your long term
care on your own. There several ways you
can leverage your income, savings and home equity.
A reverse mortgage is a home
equity loan that allows you to
receive cash against the value of your home without selling it. With a reverse
mortgage, you can receive monthly payments or a lump sum payment. You do not
lose the title to your home and may continue to live in it. The amount of the loan becomes due when the
he borrower (or spouse) dies or sells the home. If you heirs wish to keep the
home, they may choose to repay the loan outright.
Establishing an annuity through your
insurance company may also help pay for long term care. Generally, in exchange
for a single payment or a series of payments, the insurance company will send
you an annuity, which is regular
payments over a specified period of time. There are several kinds of
annuities and they have an impact on your taxes, your heir’s, and also your
Medicaid coverage, so it is best to consult with your tax professional in order
to decide which type of plan is best for you.
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In
our changing society, it has become increasingly important to plan ahead for
post-retirement care and long term housing. As the nation’s most trusted
relocation and liquidation resource, Caring Transitions® is
here to support you with information and also with all the services you need to
manage the home transitions that inevitably follow each of your long-term care
transitions. Call us today for relocation, downsizing, decluttering, estate
sale and online auction services!