What Long-Term Care Insurance (LTCI) Alternatives are available if you are less than healthy?

Alternatives to Traditional Long-Term Care Insurance and Linked Benefit Long-Term Care Insurance are available. However, the chronic care benefits these alternatives provide may be limited and could be subject to taxation. These alternatives are for you if you want to buy traditional or insurance-based long-term care insurance, but can no longer qualify.

Most people are aware that it is not possible to purchase auto insurance after your car has been totaled or stolen. You cannot buy homeowner’s insurance after your house has been robbed or it burned to the ground. The same is true for Long-Term Care Insurance. To qualify for Long-Term Care Insurance, you must be in reasonable health and be able to afford it. If you do not qualify, there are alternatives available that may be useful.

Pros: Easier to qualify for coverage, more affordable, and covers short-term needs.
Cons: Limited coverage duration (short-term) and may not meet full Long-Term Care needs.

Short-Term Care Insurance

Short-Term Care insurance is similar to Traditional Long-Term-Care Insurance (LTCI) except that the benefit period is shorter than one year. Short-Term Care may be the right product for you if you:

Are looking to add to an existing long-term care plan.
Cannot afford long-term care insurance.
Cannot qualify for long-term care insurance.

Short-Term Care policies pay monthly or daily benefits directly to you (indemnity) or pay actual charges (reimbursement) if you need assistance in your home or at a facility. You can select the benefits that best suit your specific needs. To qualify for benefits, your health care practitioner must certify you as having either:

The inability to perform activities of daily living.
A cognitive impairment

Short-Term Care insurance simplified issue application underwriting is easier than for a typical long-term care insurance policy. Short-Term Care policies could help:

Pay for your stay in an assisted living facility or skilled nursing home.
Offset costs associated with your adult day care/hospice care.
Pay for care in your own home and home health aids.

Depending on the policy, short-term care may also cover:

Hospice care.
Prescription drugs.

You may still need additional care during recovery from an outpatient procedure or a shorter hospital stay. However, unexpected medical costs can add up. Many people rely on Medicare to cover these additional out-of-pocket expenses during recovery. Unfortunately, Medicare coverage and other health insurance are limited, and certain requirements need to be met first. Rather than digging yourself into debt, Short-Term Care Insurance is a great alternative to Long-Term Care Insurance and can help protect your savings from out-of-pocket medical expenses.

Critical Illness

Critical Illness Insurance helps cover expenses that your other insurance may not cover, and it helps cover costs such as recovery in:

An Assisted Living Facility.
Nursing Home.
At Home.

You choose your monthly Critical illness base benefit, and how long it will last (your benefit period), and set your monthly facility benefit. Most policies are designed to pay cash benefits upon proof of diagnosis of a covered condition. You get the full value of your benefit regardless of actual expenses. Besides your care, you could spend your cash on anything you need:

Medical deductibles and co-pays.
Household expenses – mortgage, utilities, etc.
Out-of-network and experimental treatments.
Lost income.
Transportation and lodging.
Home health care and care in a facility.

A Critical Illness insurance simplified issue application underwriting is usually easier than for a typical long-term care insurance policy. Critical Illness policies do not cover every illness. You should consult the list of covered Illnesses before you buy, so you can determine if the conditions you are concerned about are covered.

You may still need additional care during recovery from certain illnesses. Unexpected medical costs can add up. Many people rely on Medicare to cover these additional out-of-pocket expenses during recovery. Unfortunately, Medicare coverage and other health insurance are limited, and certain requirements need to be met first. Rather than digging yourself into debt, a Critical Illness policy can help protect your savings from out-of-pocket medical expenses. Cash from a Critical illness policy can also help pay for lifesaving treatments that require temporary relocation, such as waiting for a major organ transplant.

Hospital Indemnity

Hospital Indemnity insurance helps you cover some of the co-payments, deductibles, and out-of-pocket expenses of your health insurance plan. Cash benefits are paid directly to you to help cover the costs associated with care, like:

Daily Hospital confinement.
Ambulance trips.
Critical accidents.
Skilled nursing facility stays.
Dental/Vision.
Short Duration Hospital Stays.
Outpatient Surgery.

Hospital Indemnity benefits are extremely limited and require hospital confinement. A typical Hospital Indemnity plan will pay you between $100 and $750 per day for a plan covering three to twenty-one (21) days. If you have 21 days at $750 per day (21 times $750), your maximum benefit per eligible confinement is $15,750. If the policy includes a restoration of benefits feature, most would restore benefits after 60 days of no hospital confinement.

Hospital Indemnity insurance typically uses a simplified issue application, which means underwriting is usually easier than for a typical long-term care insurance policy. For some ages, a guaranteed issue policy may be available.

Unexpected medical costs can add up, even if you have Medicare or other health insurance. A Hospital Indemnity plan could be an affordable way to help protect your savings from all the costs of deductibles, co-pays, and additional expenses not covered by Medicare or your major health insurance plan. You so you can use the funds any way you choose.

Linked Benefit Riders

Linked Benefit Riders (Confinement Care) differ from Linked Benefit Long-Term Care Insurance. There is typically little to no underwriting, and they pay an accelerated benefit for care needed due to a chronic illness or injury. The tax code allows Linked Benefit Riders. However, benefits may be taxable when paid. Linked Benefit Riders help you leverage your money and get more bang for your buck. There are some good reasons you might want to adopt this approach, including:

You have a lot of money in the bank.
You want access to the cash value.
When you die, your heirs will inherit the cash value or death benefit, less any long-term care benefits you receive.
You are concerned about paying for coverage that you may never need.
Have limited funds to spend on a variety of insurance options.
You have significant cash values you can transfer from existing non-qualified insurance products.

While something may be better than nothing, there are some disadvantages to using a Linked Benefit or Chronic Illness rider:

The rider often provides lower long-term care coverage (a smaller benefit) than a full long-term care insurance policy.
The coverage may only apply to chronic illnesses and not to other types of long-term care.
Using the living benefit reduces the death benefit paid to your beneficiaries.
Benefits may not be tax-free.

Excess coverage for a Spouse or Partner

Let’s say that you are healthy enough to qualify for long-term care insurance, but your spouse or partner is not. You may want to consider purchasing an excessive amount of indemnity coverage for yourself.

With an Indemnity benefit long-term care insurance policy, a cash benefit is paid to you if you are eligible for policy benefits and make a claim. You can spend the cash benefit any way you need to.

This strategy could provide the money to pay the bills if both you and your unhealthy spouse or partner need care at the same time. However, if your spouse or partner requires care and you are not eligible for policy benefits and cannot file a policy claim, no cash benefit would be available.

You might want to compare companies

There are a few rating services that analyze the financial strength of insurance companies. The financial strength of an insurance company is a very important factor to consider when purchasing long term care insurance. Claim payments are backed by the financial strength and claims-paying ability of the insurance company or companies you choose. Hence, it may be in your best interest to choose a highly rated insurnace company or better yet, more than one company. You can check ratings from sources like AM Best, Fitch, Moody’s and Standard and Poor’s.

The Bottom Line:

If you cannot qualify for a fully underwritten long-term care insurance policy, there are some long-term care insurance alternatives available. You may have limited choices. Benefits might be taxable. One advantage you may have is that, rather than paying for your care dollar for dollar, you can leverage your money and potentially receive more care for the same price.

Speak with a Specialist

Let’s begin the conversation. If you’re curious about whether long-term care insurance is right for you, now is the time to get the facts before you make any long-term decisions. The earlier you plan, the more options you’ll have.