Long Term Care Insurance Doesn’t Have to Break the Bank

October 06, 2016

Did you know that you could do everything perfectly right in saving and investing for retirement only to see your entire nest egg wiped out with just a few years of long term care? It’s the missing piece of most people’s retirement plans. After all, it’s estimated that 70% of 65-yr olds will need some type of long term care and yet Medicare and other health insurance programs don’t cover it.

Medicaid does cover it, but you have to spend down virtually all of your assets to qualify. You could purchase a long term care insurance policy, but they can be expensive or even impossible to qualify for if you have health problems. Here are some ways you might be able to get long term care insurance for less:

Ask your employer. Many employers offer group long term care insurance as an employee benefit. While it’s typically not paid for or even subsidized by your employer, you might be able to get a better price with limited underwriting, especially if you have any health issues.

See if your state offers a long term care partnership program. If you purchase a policy through a partnership program and use up all the insurance coverage, you can keep an additional amount of assets equal to the insurance you purchased and Medicaid will pick up the rest of the bill. For example, if you purchase $500k worth of coverage and use all the benefits, you can qualify for Medicaid and keep $500k worth of assets that would otherwise have had to be spent down. This way you know exactly how much insurance to buy: enough to CYA or cover your assets. Without that Medicaid protection, you might need to purchase additional coverage to make sure you have enough.

Consider a life insurance or annuity long term care rider. Many insurance companies sell life insurance policies or annuities with a rider that provides some long term care insurance protection. This is more expensive than a standalone policy, but the underwriting is often more lenient and if you don’t use the long term care benefits, at least your beneficiaries will eventually receive the death benefit.

Buy a single premium policy. One of the biggest problems with long term care insurance is rapidly rising premiums that cause many people to drop their coverage. To avoid this, consider a single premium policy. It’s a lot of money upfront but can save you money in the long run.

Not planning for long term care costs is one of the biggest mistakes people make. Part of that is the feeling that you have to choose between paying unaffordable premiums or risking depleting your assets. As always, make sure you understand all of your options before making a decision.