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 should be be a crucial part of your retirement planning. After all, 49% of men and 64% of women reaching age 65 today will need significant long-term care, according to the Department of Health and Human Services, and 14% will need more than two years of paid care at an average cost of $120,900.

Extended illnesses are major contributor to bankruptcies among older Americans. According to one survey 1 in 7 people who filed for bankruptcy was aged 65 or older, and one of the leading causes was health care costs.

The problem is many don’t think about long-term-care until it’s too late. “The vast majority of long-term-care insurance sales happens for people between 60 and 70,” says Chris Orestis, president, Retirement Genius, an online retirement resource. “But as is the case with any purchase of an insurance product, it’s going to be factored around your health in the underwriting. People will kick the can down the road, and then a health event will happen. They think, now, I better go buy that long-term-care insurance. And then they are uninsurable. If there are health factors when they’re underwritten, they’re going to be denied.”

The best option is to buy long-term-care insurance when you are younger, when the rates are lowest. But even that isn’t hasn’t always worked out.

“Many of my clients have long-term-care insurance, or we’ve crunched some numbers and look for other ways,” says Steve Pedicini, senior wealth advisor at AlphaCore Wealth Advisory in La Jolla, California. “But even the ones that have policies are still having to evaluate regularly, because the insurance companies have petitioned the states and been able to enact massive increases on policy premiums, and people are left to decide whether they keep the insurance or lower the coverage.”

If you don’t qualify

For those who don’t qualify for long-term care insurance, there are options. Among them:

1. The VA Aid and Attendance Benefit. If you are a veteran, you could qualify for monthly benefits through the VA Aid and Attendance Benefits and Household allowance. Benefits amounts of $2,358 for long-term care, an assisted living facility or aging in place would be on top of your monthly VA benefit, says Orestis. If you were married to a veteran who is deceased, you could qualify for benefits of $1,515 a month, he says. “Once you’re approved, that’s a lifetime benefit,” he says. “And every year it’s subject to an annual (inflation) adjustment.”
2. Self-funding. “You want to be thinking about that when you’re in your 20s and thinking about how much you need to put away, because you might have to self-insure and actually pay for things out of pocket, and I think that’s what a lot of people are having to do,” says Jennifer Belmont Jennings, attorney at MGD Law in St. Louis, Missouri.   The first issue is getting a sense of if there are health concerns?” says Pedicini. Review your family health history, to get a sense for if there are illness that requires long-term care. Run the numbers looking at sources of income such as Social Security, pensions and annuities. And then look at expenditures. “What would that look like if you had a long-term care event?”
3. Workplace plans. It may not be an option for some older workers, but if you are still working, your employer might offer a group plan. “It’s worth investigating whether they can sign up for that plan and if that plan would be portable,” says Pedicini. “If they ever were to retire or separate from the employer, would they be able to take that with it? What would be the for premiums going forward?”
4. A life settlement. A life settlement involves selling a life insurance policy to a third party. “An institutional investor, a big hedge funds, investment groups, investment banks that will buy people’s life insurance policies from them while they’re still alive for a percentage of the death benefit, and then they will take over the premium payment Orestis,” says. “The policy owner will receive some percentage of the death benefit as a cash payment while they’re still alive, which they and then free to use to pay for care.”
5. A reverse mortgage. Though many financial planners will only recommend them as a last resort, a reverse mortgage is a way to take equity out of your home to get the cash needed for long-term care. That money can come in the form of a lump sum or monthly payments. Of course, when the homeowner dies, the money has to be repaid, usually by selling the home. For those who want to pass generational wealth to their children and grandchildren through their homes, this is not a viable option.
6. Hybrid products. “There are new hybrid products that are out there that incorporate both an insurance component, like a life insurance component, and a long-term-care insurance component,” says Jennings. “I think those can be worth talking to an insurance expert about to see if they make sense. You have to be careful with insurance, though. You really do want to do some research and make sure you know, you understand the company that you’re purchasing from. Are they solvent? What’s their track record? Is it a new place that popped up on the internet? There are insurance experts who do help out with this.”
7. Use an annuity. Orestis says people who receive income from an annuity can direct that annuity income towards their care needs. “Assisted living communities, home care companies, nursing homes, will all recognize that that is an income stream that is guaranteed. It could actually be directed to pay to the care provider directly, or you could administer your money and pay them yourself.”

YOUR TURN

Have you had any issues obtaining Long Term Care Insurance?  Did you have it and cancel – and if so why? Are you happy with the LTC you have? Let us know 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 author of the book “Fixing the Racial Wealth Gap.” His website is www.rodneyabrooks.com

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