According to Genworth's Cost of Care Survey, having to pay for long-term care costs can quickly deplete your savings, as the national median cost of a private room in a nursing home comes in at $9,034 per month. If you find yourself in a position where you need to pay for long-term care, be prepared. Neither of these things can be determined. Despite this, you should consider purchasing long-term care insurance to safeguard yourself from this potentially ruinous expenditure.
Long-Term Care Insurance
Long-term care insurance has historically been known for being prohibitively costly, hard to comprehend, and filled with controversy due to premium hikes on earlier plans that were improperly priced. As a result, most individuals do not carry this kind of coverage. According to the United States Department of Health and Human Services, around seventy percent of persons who become 65 years old today will at some time in their lives need long-term care services. However, the American Association for Long-Term Care Insurance reports that only slightly more than 7.5 million individuals have purchased coverage.
Stand-Alone Long-Term Care Insurance
It turned out that insurers charged the premiums on those older policies were significantly lower than they should have been. In addition, it may be challenging to comprehend what is covered by long-term care insurance. There aren't many individuals who are aware of it or how it operates.
The most reasonable solution to these issues would be to design a product that would both be more economical and simpler to comprehend. For instance, New York Life announced in late 2018 the debut of a new long-term care insurance policy known as NYL My Care. The firm characterized this plan as "simple, inexpensive, and flexible" and targeted its marketing at customers from the middle class.
The Pros and Cons of Long-Term Care Insurance
People who are in a position to pay not just the premiums for long-term care insurance now but also for any prospective increases in those costs in the future should consider purchasing a stand-alone policy. On the other side, you will be required to pay yearly premiums for the rest of your life for a product you may never use. In addition, if you stop paying the required premiums and allow the policy to expire, you risk receiving no compensation.
Hybrid Insurance for Long-Term Care
Policies that combine life insurance with long-term care insurance provide customers the convenience of having two forms of protection in one package. Premiums may be locked in at a predetermined amount for the length of the policy and will not be susceptible to annual increases as premiums for stand-alone policies might be. There is a possibility that the medical underwriting will be less stringent than what is required for a stand-alone long-term care policy. When a rider that provides a continuation of benefits is added to these plans, they may also benefit those searching for long-term care benefits that are either limitless or for their lifetime.
MoneyGuard is a hybrid product offered by Lincoln National Life Insurance Company. According to Michelle Adler, a financial adviser working for Citigroup in Manhattan, she loves this policy because the premium is guaranteed, and your heirs are eligible to receive a death benefit. The offering is in the form of universal life insurance that comes with an acceleration-of-benefits rider for optional long-term care. In contrast to stand-alone long-term care plans, this one does not have a deductible or a waiting period.
Benefits of Hybrid Insurance Policies
When it comes to these kinds of plans, the amount of money spent on care is deducted from the policy's death benefit. The leftover money is tax-free to the policyholder's heirs, which is beneficial for estate planning and may reduce the taxes owed upon the policyholder's passing. If your estate is worth $12.06 million or more when you pass away in 2022, the federal government will not tax your inheritance since this threshold represents fewer than 0.01 percent of all estates.
The Pros and Cons
Individuals should consider purchasing an annuity with long-term care benefits if they are interested in securing a regular monthly income, preventing the risk of outliving one's assets or receiving potential savings by making health underwriting more straightforward. Underwriting standards for long-term care annuities are less stringent. One disadvantage is that to purchase an annuity, and you will need to have a sizeable amount of money available upfront. In addition, interest rates are quite low in today's market, which means that the annuity would not give the optimum advantages for long-term care.
