The problem with long-term care insurance is that it’s expensive, and not everyone is eligible. If you’re looking for alternatives to long-term care insurance, here are some options to consider.
Save Your Money
One option is to pay for long-term care expenses on your own. You will need robust savings to do this, and just a few years of care can put a big dent in your savings. But some people feel more comfortable with this option so that they’re not paying for insurance they may never use.
If you’re thinking about paying for long-term care out of pocket, know what the rates are in your state. Here in New Jersey, average nursing home rates are $11,254 a month, about 45 percent higher than the U.S. median average of $7,756.
Tap Into Your ‘Living Benefits’
Also known as an ‘accelerated death benefit,’ this feature allows you to take a portion of your life insurance payout while you’re still alive. You can use this money to pay for medical expenses such as long-term care. However, using this policy for long-term care will reduce the payout your life insurance beneficiaries receive.
Sell Your Life Insurance Policy
You can also sell your whole life insurance policy in New Jersey and use the money for whatever you want, including long-term care. The proceeds you get are likely to be more than what you would get from surrendering the policy for its cash value.
What you do want to watch for, however, is getting a fair price for your policy. It’s also possible that the proceeds will be taxed, plus your beneficiaries will no longer get a death benefit when you die.
Take a Loan on Your Life Insurance
If you take a loan from your life insurance policy’s cash value, you won’t have to pay taxes on it. You can't take it all, however, or your policy will lapse. But, you can take most of the cash value and then pay back this loan, with interest. If your health care needs are going to cost a lot more than what you have in your policy, it’s a better idea to surrender it.
Use an Annuity
For a steady stream of income, you can buy an immediate annuity and pay for long-term care. With an immediate annuity, you pay a one-time lump sum and the insurer provides a stream of money for a certain period of time, or the rest of your life. The amount you get depends on a number of factors, such as your age and gender.
These are just some of the ways that you can pay for long-term care without taking out a long-term care insurance policy. There is no one-size-fits-all solution, so schedule an appointment with Leonard Financial Solutions to discuss your options.