New Options for Southeastern Massachusetts Long-Term Care Insurance

Many Americans assume that they’ll be able to live on Medicare and Social Security benefits after they retire from working full-time. However, Medicare and Social Security benefits won’t provide everything we need to live comfortably in retirement. One of the most expensive aspects of retirement for many of us involves medical care. Gaps in Medicare coverage can cause devastating financial consequences. One way to protect yourself is to purchase long-term care coverage.

Downsides of Traditional Long-Term Care Policies

Long-term care insurance covers many medical needs that typical health insurance, including Medicare, won’t cover. For example, long-term care insurance covers adult or elder daycare, in-home care, and extended stays in nursing homes or similar facilities. It also protects people who are ill or injured and need assistance with daily activities such as dressing, toileting, eating, bathing, and transferring.

Traditional long-term care insurance policies work like automobile insurance. The customer pays premiums continually, and they will be covered should they need long-term care. Unfortunately, long-term care policies can be prohibitively expensive for many Americans. There are several new options for long-term care insurance available on the market today. Discussing your retirement plan with an experienced estate planning lawyer can help you take advantage of the best long-term care options available.

Use the “Living Benefits” of a Life Insurance Policy

Using the living benefits of your life insurance policy is one option for long-term care insurance. This feature can be called “accelerated death benefits.” Most permanent life insurance policies, such as whole life insurance, will allow you to use a portion of your life insurance payout. At the same time, you’ll be able to cover your medical expenses, including long-term care expenses. Your death benefit will also be reduced by the amount you use for long-term care. 

Reading the fine print is important when using living benefits on a life insurance policy. A terminal illness diagnosis could trigger your ability to use these benefits. Keep in mind that using your life insurance policy for long-term care will reduce the payout for your beneficiaries.

Sell Your Life Insurance Policy

Another option involves selling your permanent life insurance policy and using the proceeds to cover your long-term care expenses. The proceeds you will receive from selling your policy are typically more than what you’d receive if you surrendered your policy for the cash value. On the other hand, the proceeds will be subject to taxes, and your beneficiaries will not receive a death benefit from the policy. Determining whether you’re receiving a fair price can be difficult as well.

Use an Annuity

Annuities provide customers with a steady stream of income that can help them pay for their long-term care. If you purchased an immediate annuity, you would pay a one-time lump sum. The insurance company will provide you with a guaranteed stream of income for the rest of your life. The amount you receive will depend on the purchase price of the annuity and your age, gender, and health status.

Purchase a Short-Term Care Insurance Policy

Short-term care insurance policies are a newer option available on the market. Short-term care insurance covers the same type of medical and assisted living expenses covered by long-term care policy. However, they provide benefits for a shorter time frame. Typically, short-term care policies cover care from 3 months to 360 days. As the customer, you can choose the time frame of coverage you would like when you purchase the policy. 

There is no elimination, or waiting period, with the short-term care policy in most cases. Instead, the policy will begin paying out as soon as you begin using long-term care. With a long-term care policy, the elimination period functions like a deductible. The coverage will not begin until the waiting period is over. With most policies, the elimination period is 90 days.

Short-term care insurance is lower in price than long-term care insurance, and there is usually no deductible. It’s also easier to qualify for short-term care insurance. On the other hand, short-term care insurance won’t protect you if you need long-term care for over a year. Additionally, long-term care insurance providers must meet stricter consumer protection standards.

Purchase a Combination Long-Term Care/Life Insurance Policy

Purchasing a combination of long-term care and life insurance coverage is another newer option. These types of insurance policies are also called hybrid life insurance and long-term care insurance policies. When you purchase one of these policies, the insurance company will provide you with a lump sum of money for long-term care if you need it. If you don’t use the total amount of money, the rest of the money will go to your named beneficiary after you pass away.

In most cases, customers pay a large premium up front, and the cost ranges from $75,000 to $100,000. Alternatively, the customer may make a few significant payments over several years. If you decide you no longer want the policy, you may be able to get your money back. One of the benefits of a hybrid policy involves your loved ones receiving the money if you never use it. When you pay expensive premiums for long-term insurance, and you never end up needing long-term care, your loved ones will never recoup the expensive premiums you paid. Whatever you don’t use, your beneficiaries will receive after you pass away.

Discuss Your Long-Term Care Options With a Skilled Lawyer

Long-term care insurance is an essential aspect of every estate plan. If you are interested in discussing your options for long-term care insurance, the skilled estate planning lawyers at Surprenant & Beneski, PC, are here to help. Contact our Southeastern Massachusetts estate planning team today to learn more about how we can help you prepare for the future.