Preparing for possible long-term care (LTC) costs is essential to prudent retirement planning. Most do this by purchasing a long-term care insurance policy. These policies pay you in the event that you need assistance with activities of daily living.
LTC insurance is medically underwritten, which means if you have (or have a history of) health issues, you can be declined for coverage. In fact, 30% of seniors age 60-69 who applied for LTC insurance were declined. For applicants over 70 years old, 44% were declined for coverage.
If you’ve tried unsuccessfully to obtain LTC insurance, consider these options.
Short-term care insurance can be a great option for someone who is unable to qualify for LTC insurance. An STC plan can help pay for the costs of receiving needed care and may provide additional benefits to pay for covered medical services and treatments.
Like its name implies, STC insurance pays benefits for a shorter period of time—usually one year or less. Even though it’s short-term, this can be a life saver for your family’s finances.
Obtaining STC insurance is much easier than LTC. Often, applications consist of only a few health questions without the need for a medical exam. If you’ve been declined for LTC, you may be a good candidate for an STC plan.
Furthermore, the cost for an STC plan is far more affordable than a traditional LTC insurance policy.
Life Insurance/LTC Combination
Even though you were declined for LTC, you may be able to get approved for life insurance! But how?
An insurance company has a much easier time underwriting life insurance than LTC insurance. Since LTC will be needed by a majority of seniors and the costs and length of time needing care can widely vary, insurers have historically had a hard time figuring out how to price LTC insurance policies.
If you’re able to qualify for a life insurance policy, you may be able to combine the benefits of life insurance and LTC insurance. A life insurance/LTC combination policy gives you the option to advance your policy’s death benefit if you need LTC. If you never use it, your beneficiaries receive your death benefit when you pass away.
If you have assets set aside to pay for potential LTC expenses, you can leverage these funds using an annuity with an LTC rider.
The best way to think of this option is as a high deductible LTC plan. The money you invest in the annuity is used first if you need to pay for LTC expenses. If your money is exhausted, the insurance company will step in to pay for these expenses. The amount and length of your benefit is determined at the time of application. You might even be able to provide for a lifetime benefit.
Take the next step
Just because you were declined for LTC insurance doesn’t mean you are “unhealthy.” LTC insurance is difficult to obtain. But don’t stop there! Not looking at the alternatives outlined here can be disastrous to your finances.
If this is you—let’s chat. A quick phone call or meeting is all it takes to help determine which option is best for you.