If You Can’t Get Long-Term Care Insurance…
What if you can’t get long-term-care insurance? There are still a few options.
Long-term-care insurance is a vital component of retirement planning. According to the Department of Health and Human Services, 49% of men and 64% of women reaching age 65 today will require significant long-term care. Alarmingly, 14% will need more than two years of paid care, with an average cost of $120,900.
Extended illnesses are a leading cause of bankruptcy among older Americans. A survey revealed that 1 in 7 individuals who filed for bankruptcy were aged 65 or older, with health care costs being a primary factor.
Unfortunately, many people delay thinking about long-term care until it’s too late. Chris Orestis, president of Retirement Genius, notes, “The vast majority of long-term-care insurance sales happen for people between 60 and 70.” He emphasizes that health factors play a crucial role in underwriting, and those who postpone their decision may find themselves uninsurable after a health event.
The ideal time to purchase long-term-care insurance is when you are younger, as rates are generally lower. However, even this strategy can backfire.
“Many of my clients have long-term-care insurance, but even those with policies must evaluate them regularly,” says Steve Pedicini, senior wealth advisor at AlphaCore Wealth Advisory in La Jolla, California. Insurance companies have been known to petition states for significant premium increases, leaving policyholders to decide whether to maintain their coverage or reduce it.
If you don’t qualify
For individuals who do not qualify for long-term care insurance, several alternatives exist:
- The VA Aid and Attendance Benefit. Veterans may qualify for monthly benefits through the VA Aid and Attendance Benefits and Household allowance. This can provide an additional $2,358 for long-term care, assisted living, or aging in place. Surviving spouses of veterans may also receive $1,515 monthly. “Once you’re approved, that’s a lifetime benefit,” Orestis explains, noting that it is subject to annual inflation adjustments.
- Self-funding. “Consider this when you’re in your 20s,” advises Jennifer Belmont Jennings, an attorney at MGD Law in St. Louis, Missouri. Assess your family health history and potential long-term care needs. Evaluate your income sources, such as Social Security and pensions, against your expected expenditures for long-term care.
- Workplace plans. If you are still employed, check if your employer offers a group long-term care plan. “Investigate whether you can enroll and if the plan is portable,” Pedicini suggests. This is crucial if you plan to retire or change jobs.
- A life settlement. This involves selling a life insurance policy to a third party, such as institutional investors. “They will buy your policy for a percentage of the death benefit, allowing you to receive cash while still alive,” Orestis explains. This cash can then be used for care expenses.
- A reverse mortgage. While often recommended as a last resort, a reverse mortgage allows homeowners to access their home equity for long-term care costs. However, this option requires repayment upon the homeowner’s death, typically through the sale of the home, which may not align with those wishing to pass on generational wealth.
- Hybrid products. New hybrid insurance products combine life insurance and long-term care components. “These can be worth discussing with an insurance expert,” Jennings advises. Ensure you research the insurance company’s stability and reputation before purchasing.
- Use an annuity. Orestis notes that individuals receiving income from an annuity can direct those funds toward their care needs. Assisted living facilities and nursing homes recognize this as a guaranteed income stream, which can be used to pay for care directly.
YOUR TURN
Have you faced challenges in obtaining long-term care insurance? Did you cancel a policy, and if so, why? Are you satisfied with your current long-term care options? Share your experiences in the comments!
Rodney A. Brooks is an award-winning journalist and author. The former Deputy Managing Editor/Money at USA TODAY, his retirement columns appear in U.S. News & World Report and Senior Planet.com. He has also written for National Geographic, The Washington Post, and USA TODAY and has testified before the U.S. Senate Special Committee on Aging. His book, “The Rise & Fall of the Freedman’s Bank, And Its Lasting Socio-economic Impact on Black America” was released in 2024. He is also the author of “Fixing the Racial Wealth Gap.” His website is www.rodneyabrooks.com
Your use of any financial advice is at your sole discretion and risk. Seniorplanet.org and Older Adults Technology Services from AARP make no claim or promise of any result or success.
What if you can’t get long-term-care insurance? There are still a few options.
Long-term-care insurance is a vital component of retirement planning. According to the Department of Health and Human Services, 49% of men and 64% of women reaching age 65 today will require significant long-term care. Alarmingly, 14% will need more than two years of paid care, with an average cost of $120,900.
Extended illnesses are a leading cause of bankruptcy among older Americans. A survey revealed that 1 in 7 individuals who filed for bankruptcy were aged 65 or older, with health care costs being a primary factor.
Unfortunately, many people delay thinking about long-term care until it’s too late. Chris Orestis, president of Retirement Genius, notes, “The vast majority of long-term-care insurance sales happen for people between 60 and 70.” He emphasizes that health factors play a crucial role in underwriting, and those who postpone their decision may find themselves uninsurable after a health event.
The ideal time to purchase long-term-care insurance is when you are younger, as rates are generally lower. However, even this strategy can backfire.
“Many of my clients have long-term-care insurance, but even those with policies must evaluate them regularly,” says Steve Pedicini, senior wealth advisor at AlphaCore Wealth Advisory in La Jolla, California. Insurance companies have been known to petition states for significant premium increases, leaving policyholders to decide whether to maintain their coverage or reduce it.
If you don’t qualify
For individuals who do not qualify for long-term care insurance, several alternatives exist:
- The VA Aid and Attendance Benefit. Veterans may qualify for monthly benefits through the VA Aid and Attendance Benefits and Household allowance. This can provide an additional $2,358 for long-term care, assisted living, or aging in place. Surviving spouses of veterans may also receive $1,515 monthly. “Once you’re approved, that’s a lifetime benefit,” Orestis explains, noting that it is subject to annual inflation adjustments.
- Self-funding. “Consider this when you’re in your 20s,” advises Jennifer Belmont Jennings, an attorney at MGD Law in St. Louis, Missouri. Assess your family health history and potential long-term care needs. Evaluate your income sources, such as Social Security and pensions, against your expected expenditures for long-term care.
- Workplace plans. If you are still employed, check if your employer offers a group long-term care plan. “Investigate whether you can enroll and if the plan is portable,” Pedicini suggests. This is crucial if you plan to retire or change jobs.
- A life settlement. This involves selling a life insurance policy to a third party, such as institutional investors. “They will buy your policy for a percentage of the death benefit, allowing you to receive cash while still alive,” Orestis explains. This cash can then be used for care expenses.
- A reverse mortgage. While often recommended as a last resort, a reverse mortgage allows homeowners to access their home equity for long-term care costs. However, this option requires repayment upon the homeowner’s death, typically through the sale of the home, which may not align with those wishing to pass on generational wealth.
- Hybrid products. New hybrid insurance products combine life insurance and long-term care components. “These can be worth discussing with an insurance expert,” Jennings advises. Ensure you research the insurance company’s stability and reputation before purchasing.
- Use an annuity. Orestis notes that individuals receiving income from an annuity can direct those funds toward their care needs. Assisted living facilities and nursing homes recognize this as a guaranteed income stream, which can be used to pay for care directly.
YOUR TURN
Have you faced challenges in obtaining long-term care insurance? Did you cancel a policy, and if so, why? Are you satisfied with your current long-term care options? Share your experiences in the comments!
Rodney A. Brooks is an award-winning journalist and author. The former Deputy Managing Editor/Money at USA TODAY, his retirement columns appear in U.S. News & World Report and Senior Planet.com. He has also written for National Geographic, The Washington Post, and USA TODAY and has testified before the U.S. Senate Special Committee on Aging. His book, “The Rise & Fall of the Freedman’s Bank, And Its Lasting Socio-economic Impact on Black America” was released in 2024. He is also the author of “Fixing the Racial Wealth Gap.” His website is www.rodneyabrooks.com
Your use of any financial advice is at your sole discretion and risk. Seniorplanet.org and Older Adults Technology Services from AARP make no claim or promise of any result or success.
