Alternatives to Long-Term Care Insurance

Posted by Amanda on August 29, 2013

In a recent article on Long-Term Care Insurance, I discussed the LTC insurance plan I purchased while an environmental investigator for the state of Texas. For $22 per month, I was given a sort of peace of mind whenever my job sent me onsite at toxic and potentially dangerous chemical, metals, and recycling plants.

Up until I began my environmental job in 2008, I had never carried LTC insurance. Before this job I had worked in market research, then sales, and then I was in college. However, with a bit of age, I see that accidents and unfortunate situations that would necessitate the kind of care LTC insurance covers can happen at any age, whether working in a cubicle, learning in a classroom, or on the campus of a chemical plant.

Alternatives to Long-Term Care Insurance

If, like me in my early twenties, you also do not wish to purchase LTC insurance, are there alternatives that would help to cover the same types of expenses? Could you possibly be covered already through Social Security Disability Insurance? Let’s take a look.

What Kind of Care Coverage Would an Alternative Plan Need to Replace? Long term care (LTC) insurance covers care services one would need in the event that they can no longer care for themselves because of a prolonged physical illness, disability, or cognitive impairment. LTC attempts to help a person maintain their current lifestyle, but not necessarily improve or correct a medical condition. Types of coverage include: nursing home cared, assisted living care, home health care, adult day care, hospice care, respite care (care to allow family members who are caregivers to have time off), care after a hospital stay, help with household chores, or caregiver training for family members. So what other plans can help to cover these same services?

Social Security Disability Insurance

One of the reasons why I did not feel the need to get LTC insurance in my early twenties was because I thought that Social Security Disability Insurance (SSDI) would cover the same thing (and without me having to pay a monthly premium, aside from the taxes I was paying into the social security system already). It turns out that these are two completely different programs.

While LTC insurance focuses on covering the costs of services you may need to maintain your current lifestyle, SSDI focuses on replacing part of your salary in the event that you become disabled and cannot work for at least a year. You have to meet certain income guidelines and other criteria, and it is a last resort situation (i.e. you may wish to look into purchasing a private short-term or long-term disability plan instead of relying on SSDI in the event that you not work for a period of time).

In other words, this is not a viable alternative to LTC insurance plans.

Life Insurance

In lieu of LTC insurance, you can look at your life insurance policy. Some life insurance policies include a provision that allow you to use some of your life insurance policy before you die if you are diagnosed with a long-term, catastrophic, or terminal illness. If this is not the case in your life insurance policy, then you may be able to purchase a rider that will give you the option.

Annuity Contracts

If you have an annuity contract, look it over to see if it has a provision that would allow you to withdraw money without a penalty to pay for the types of long-term care services discussed above. Note that there are certain criteria that must be met in order for the transfer of money to be tax-free, including the annuity must be non-qualified, the long term care insurance policy must meet the requirements of the Health Insurance Portability and Accountability Act (HIPPA) and IRS criteria, and the exchange must be made directly from the annuity issuer to the long-term care insurance company.

Viatical and Life Settlements

If you have a life insurance policy, then you can sell it to certain companies who purchase the policy in order to reap the cash you will need to pay for LTC services. These companies will pay only a percentage of the death benefit, and typically more than its cash surrender value. This is called a viatical settlement if it is done when you are terminally ill and have a life expectancy of less than two years, or it is called a life settlement if you are selling because you no longer need or want your policy. The company that purchases the policy will assume premium responsibilities, become the full owner of the policy, and collect the benefits upon your death.

Do you currently carry a LTC policy? Are you using an alternative plan?

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