Long-Term Care: Other Coverage You Might Explore
A third of applicants are rejected from buying long-term care insurance. Here are some smart alternatives.
Long-term care insurance isn't for everyone. About a third of applicants are rejected, and that number is 40% for people ages 65 to 69, says Tom Beauregard, founder of HCG Secure, in Goshen, Conn., which develops and sells long- and short-term care insurance. "A good percentage are going to get rejected based on medical history, and a good percentage are going to look at the premiums and say, 'Well, that's unaffordable,'" says Beauregard. If you don't qualify for a plan or can't afford one, there are other options you might explore, including these six.
An Employer's Group Plan
Some employers offer long-term care insurance as an employee benefit. These plans accept people with health conditions even if they were disqualified from buying an individual policy.
Link to an Annuity
There are a number of ways to link long-term care to deferred annuities. One way is a a deferred fixed annuity with a long-term care insurance rider. With this option, once you demonstrate that you can't do two of the six activities of daily living, such as bathing or feeding yourself, the rider can be tapped, increasing the annuity payout typically by two to three times, says Marc Glickman, an actuary and chief executive officer of Los Angeles-based BuddyIns, which sells traditional and hybrid long-term care insurance.
In some cases, depending on the annuity and the type of long-term coverage, you don't need to qualify for it medically, so this may be a good choice for people with uninsurable chronic illnesses. But you do need a substantial sum of money available to put into the annuity, typically $100,000 or more.
Short-Term Care Insurance
A less expensive option, which is not available in all states, is a short-term plan. It only covers care for a year or less, up to a daily or weekly limit, Glickman says. "The reason people are using it is because they can't qualify for traditional long-term care, and they'd rather get the first year covered than not have any insurance at all," he adds.
The plans can be a particularly good option for someone who is ineligible for long-term coverage because of poor health, or is age 75 and older or a single woman. Unlike long-term care plans, short-term care insurance does not charge more for women. A 65-year-old man or woman could pay $63 a month for home care benefits of up to $1,050 weekly. The cost rises the older you are and the more robust the benefits, according to the American Association of Long-Term Care Insurance. Because many short-term care plans have no elimination period before the benefits kick in, the insurance can be used to cover the waiting period before a traditional long-term care policy will pay out.
Some life insurance policies let you pay for care by tapping the death benefit while you're alive. A policy with accelerated benefits may limit the amount you can draw down to 70% to 80% of the maximum death benefit, but some companies let you take it all, says Robert Eaton, principal and consulting actuary with Milliman in Tampa, Fla.
On your own or with the help of a financial planner, you could determine how much money to set aside for long-term care in a retirement or investment account. "Look at which investments you want to tap first to pay for your care. You need to put a plan together now, not when it happens," says Brian Gordon, president of Murray A. Gordon and Associates, a long-term care insurance broker in Bannockburn, Ill.
A State With a Plan
Or perhaps you should consider moving to the state of Washington. In 2019 the state became the first in the country to pass a law imposing a mandatory payroll tax that will fund up to $36,500 in benefits for individuals and cover an array of long-term care costs starting in 2026.
The law has been met with a lawsuit and fierce opposition, which delayed parts of the state program's implementation. Nonetheless, a number of states are watching Washington's situation closely, says Howard Gleckman, a senior fellow at the Urban Institute. "I think inevitably we will have a social insurance public long-term care program, either state by state or at the federal level," Gleckman says. "It's not going to happen soon, but it's inevitable we'll have to do it because it's an expense that's getting out of control."