The Challenges of Planning for Long-Term Care
As we age, we may find ourselves facing new challenges, such as declining health and the need for long-term care services. This can be a difficult and overwhelming time for individuals and their families, as the emotional and financial cost of long-term care can be incredibly high. Long-term care insurance can help ease the burden of these costs, but it can also add to the already complex web of financial responsibilities that many of us face.
The problem is, between saving for retirement, paying taxes, and paying for our current living expenses, the thought of adding another expense to our financial lives can be daunting. It may feel like all you do is work and make money so you can just survive.
At the same time, the importance of having a plan in place for long-term care cannot be overstated. The cost of long-term care can easily deplete one’s savings and leave loved ones in a difficult financial situation. That’s why it’s important to understand the true cost of not only owning long-term care insurance, but how you allocate ALL YOUR MONEY. This understanding can help you to cut costs and save money while receiving the comprehensive coverage you want.
In this article, I will discuss the basics of long-term care insurance, as well as a hybrid life insurance/LTC option that can help you leverage your money to receive not only long-term care coverage but also a number of other valuable benefits that can make those financial government obligations help you live the type of life you want to live which reduces the cost of owning long-term care insurance.
I will explore how the life insurance cash value can be leveraged to build wealth, and how its death benefit can help you increase your cash flow from other income sources. I will also explain the difference between traditional long-term care insurance and hybrid policies from a tax and long-term care benefit standpoint as well.
I understand that financial planning can be overwhelming, but I hope that this article will provide you with the information and tools you need to make an informed decision about long-term care insurance. I also recognize the burden that comes with all of the financial responsibilities you have, but I believe that planning for long-term care is an important part of securing a comfortable future for yourself and your loved ones and if you do it right, the burden you feel will be significantly reduced!
The Basics of Traditional Long-Term Care Insurance
Long-term care insurance provides financial support to pay for medical services revolving around an insured’s ability to perform Activities of Daily Living (ADLs), such as bathing, dressing and eating. Long-term care insurance can be purchased to cover the cost of care in a nursing home, assisted living facility, or even in the comfort of one’s own home.
Traditional long-term care insurance policies typically work by paying a daily or monthly benefit amount to the insured when they require long-term care services. The correct benefit amount of a policy is determined at the time the policy is purchased and is typically based on what the anticipated cost of long-term care services will be in the insured’s area. The policy will have a waiting period, which serves as a form of deductible before benefits begin, and there is a maximum benefit period or benefit amount that could be paid.
The costs of traditional long-term care insurance policies can vary greatly depending on a number of factors, including the insured’s age, health, marital status, and the desired coverage amount. Premiums can be expensive and can increase as the insured gets older since these policies are issued with a “guaranteed renewability” feature which only ensures the insurance company will not cancel the policy.
Even though there is a high cost to owning traditional long-term care insurance, the benefits of owning coverage outweigh the costs, as it can provide peace of mind knowing that one’s long-term care needs are covered.
One of the benefits of traditional long-term care insurance policies is that they typically cover a wide range of long-term care services. This can include services such as home health care, adult day care, and hospice care. Traditional policies also offer a level of predictability in terms of benefits, as the insured knows exactly how much they will receive if they require long-term care services.
The two BIG benefits of traditional long-term care insurance policies are that they can help protect the insured’s assets and ensure a high quality of care. This is especially true in states who have low funded Medicaid programs. Without the assets to pay for care or long-term care insurance, the cost of long-term care services can quickly deplete one’s savings and leave them in a difficult financial situation. By having long-term care insurance, the insured can ensure that their long-term care needs are covered without depleting their assets.
Overall, traditional long-term care insurance policies can be a valuable tool for individuals who want to ensure that they have comprehensive coverage for their long-term care needs. However, the costs can be prohibitive for some individuals, which is why hybrid life insurance policies with long-term care benefits attached may be a more appealing option. We’ll explore this option further in the next section.
Saving money on traditional long-term care insurance
While traditional long-term care insurance policies can be a valuable tool for protecting yourself against the costs of long-term care, they can also be expensive. Fortunately, there are several ways to save money on traditional long-term care insurance policies.
One way to save money on long-term care insurance is to consider a Shared Care option. Shared Care allows spouses or partners to share a policy, increasing their total coverage while also reducing their premiums. For example, if both spouses have a policy with a benefit period of three years, they can combine their coverage to create a total benefit period of six years. This can result in significant savings compared to each spouse purchasing their own policy.
Another way to save money on long-term care insurance is to opt for a longer waiting period before benefits begin. Waiting periods typically range from 0 to 180 days, and the longer the waiting period, the lower the premium. Of course, it’s important to balance the potential savings with the risk of needing care during the waiting period.
You can also save money by choosing between daily and monthly benefit options. While daily benefits may seem more comprehensive, they also come with a lower price tag. Why? Because a policy owner may only need services 3-days a week and those services cost $500 each day (or $1,500 a week.) This equates to roughly $6,000 a month (or an average of $200/per day.) If the policy pays daily benefits of $200/day, the policy owner will need to pay $300 per day out of their own pocket of the $500 in charges. The policy owner who has a $6,000/monthly benefit would be fully covered.
Make sense?
State Partnership plans are another option for those who want to save money on long-term care insurance. These plans are offered by some states and allow individuals to protect their assets while still qualifying for Medicaid if they exhaust their long-term care insurance benefits. In essence, these plans provide an incentive for individuals to purchase long-term care insurance by allowing them to protect a portion of their assets while still receiving Medicaid benefits but they don’t have to purchase as much of it to accomplish their goal.
The Hybrid Life/LTC Insurance Option
As traditional long-term care insurance policies can be expensive and inflexible, only covering one risk (Long-Term Care), causing many people are turning to a hybrid life insurance option with long-term care benefits attached. These policies combine the benefits of life insurance with long-term care coverage, providing a more affordable option that can do more for those who want to ensure that they have coverage for their long-term care needs.
A hybrid life insurance policy with long-term care benefits works by allowing the insured to access a portion of the death benefit while they are still alive to pay for long-term care services. The amount of the death benefit that can be accessed varies depending on the policy, but typically ranges from 25% to 100%. If long-term care services are not needed, the death benefit passes to the policy beneficiaries income tax-free.
One of the main benefits of a hybrid life insurance policy with long-term care benefits is the ability to leverage the life insurance cash value to build wealth. Unlike traditional long-term care insurance policies, which do not have a cash value component, a hybrid policy allows the insured to accumulate cash value over time. This cash value can be used to supplement retirement income with tax-free cash flow or to be leveraged as part of Our SALLO strategy (Stable Assets Leveraging LEAP Options) to provide investment returns without the fear you could go broke if the stock market crashes. When you understand how you can receive both stock market returns and long-term care benefits more efficiently than buying stocks or a traditional long-term care policy, the decision to acquire coverage gets a lot easier.
Another advantage of a hybrid policy is the life policy’s death benefit. The death benefit of the life insurance policy allows the policy owner to take more risks in other areas of their financial life.
For example, if they are worried about waiting to take Social Security retirement benefits because they may die early, they can leverage the life insurance death benefit to replace the money they didn’t receive had they taken the Social Security Benefits early.
That isn’t all, though. When they do wait and survive for a longer period of time, the additional Social Security benefits they will receive increase tax-free based on the administration’s Cost of Living Adjustment, and those sums of money can be used to pay for long-term care or any other financial goal the policy owner has. How cool is that!
The death benefit of the hybrid life insurance policy can increase retirement income by allowing you to “spend down” the remaining assets you have and enjoy them because you know you have the policy there to replace them for your heirs or the charity you wanted to leave a legacy with.
The combination of these assets can provide a more comprehensive retirement income plan, as well as help protect your assets from being depleted by long-term care costs.
Overall, a hybrid life insurance policy with long-term care benefits attached can be an attractive option for those who want to ensure that they have comprehensive coverage for their long-term care needs without breaking the bank. These policies offer the benefits of life insurance, long-term care coverage, and the ability to build wealth using the cash value component.
It’s important to note, however, that hybrid policies may not be the best option for everyone. The required cash flow to fund these policies can still be significant, and they may not offer the same level of coverage as traditional long-term care insurance policies. It’s important to carefully consider your long-term care needs, as well as your financial situation and retirement goals, before deciding on a policy.
Deciding Between a Traditional Vs. Hybrid LTC Solution
The Benefits of Each Type of Policy
Traditional long-term care insurance policies and hybrid life insurance policies with long-term care benefits attached both offer coverage for long-term care services, but there are some key differences in the benefits they provide.
Traditional long-term care insurance policies typically offer comprehensive coverage for a wide range of long-term care services, including in-home care, assisted living, and nursing home care. The policies often have a daily or monthly benefit amount, a waiting period before benefits begin, and a maximum benefit period. The benefit amount is usually based on the cost of long-term care services in the insured’s area at the time the policy is purchased. One of the benefits of traditional long-term care insurance policies is that they offer a level of predictability in terms of benefits, as the insured knows exactly how much they will receive if they require long-term care services.
In contrast, hybrid life insurance policies with long-term care benefits attached typically offer more flexibility than traditional long-term care insurance policies. These policies allow the insured to access a portion of the death benefit while they are still alive to pay for long-term care services. The amount of the death benefit that can be accessed varies depending on the policy, but typically ranges from 25% to 100%. If long-term care services are not needed, the death benefit passes to the beneficiary tax-free.
One of the main benefits of hybrid life insurance policies with long-term care benefits attached is the ability to leverage the life insurance cash value to build wealth. Unlike traditional long-term care insurance policies, which do not have a cash value component, a hybrid policy allows the insured to accumulate cash value over time. This cash value can be used to supplement retirement income, pay for long-term care services, or be passed on to beneficiaries.
The downside of each type of policy
While traditional long-term care insurance policies and hybrid life insurance policies with long-term care benefits attached both offer coverage for long-term care services, they each have their own weaknesses that should be considered when making a decision.
One weakness of traditional long-term care insurance policies is the cost. These policies can be expensive, and the costs can increase as you age. Premiums may also increase over time, making it difficult to budget for the expense. Additionally, if you never need long-term care services, you may feel like you wasted your money on premiums.
Another weakness of traditional policies is the possibility of premium increases or policy cancellations due to changes in the insurance market. Some long-term care insurance providers have left the market or have raised premiums significantly, leaving policyholders with limited options. This can be particularly problematic for those who have been paying premiums for years and may now be facing limited coverage options.
On the other hand, one weakness of hybrid life insurance policies with long-term care benefits attached is the potential for a reduced death benefit if long-term care services are needed. Depending on the policy, accessing the long-term care benefit may reduce the death benefit available to beneficiaries. This can be problematic for those who have planned to use the death benefit to provide for their loved ones after their passing.
Another weakness of hybrid policies is that the long-term care benefit may not be sufficient to cover all long-term care costs. This is because the benefit is based on a percentage of the death benefit, and the death benefit may not be enough to cover the entire cost of long-term care services. This can leave policyholders with out-of-pocket expenses or the need to seek additional coverage.
It’s also important to note that hybrid policies may not be the best fit for everyone. For those who have significant assets and no need for life insurance, a traditional long-term care insurance policy may be a better option. Additionally, for those who have a high risk of needing long-term care services, a traditional policy may provide more comprehensive coverage.
So, how do you determine which option is best for your specific long-term care needs? It’s important to consider a few factors:
Cost: Traditional long-term care insurance policies can be expensive, and the costs can increase as you age. Hybrid life insurance policies with long-term care benefits attached can be more affordable and provide additional benefits, such as the ability to build wealth.
Coverage needs: Consider your specific long-term care needs, including the level of care you may need and the duration of care. Traditional long-term care insurance policies may provide more comprehensive coverage, while hybrid policies may offer more flexibility.
Retirement goals: Consider your retirement goals and how long-term care insurance fits into your overall retirement plan. Hybrid policies can offer additional benefits beyond long-term care coverage, such as the ability to build wealth and increase retirement income.
Health: Your health and family history can impact the cost and availability of long-term care insurance. Traditional policies typically require medical underwriting, while hybrid policies may have less stringent underwriting requirements.
In conclusion, both traditional long-term care insurance policies and hybrid life insurance policies with long-term care benefits attached can provide valuable coverage for long-term care services. Traditional policies may offer more comprehensive coverage, while hybrid policies may offer more flexibility and additional benefits. It’s important to carefully consider your long-term care needs, as well as your financial situation and retirement goals, before making a decision so you can ultimately lower the cost of owning long-term care insurance.
That brings me to my pitch to you:
STOP TRYING TO FIGURE THIS ALL OUT ON YOUR OWN!
I mean, there are at least 999,999 better things to be doing with your time than worrying about this. As much as I am glad you are here, I would much rather have you doing what you want, living your purpose, and bettering the world.
If you really want to figure out a solution (and how to coordinate your long-term care solution with the rest of your financial life so it is efficient, I want to invite you to participate in my FINANACIAL FREEDOM PROCESS, which you can learn about by clicking here.
I hope this article served you and helped you see there are possibilities when you start considering other aspects of your financial life instead of JUST LTC. Check out the Financial Freedom Process, and let’s help you put a strategy in place so you can get coverage, accomplish your objectives and live your best life.
