Long term care insurance is a fundamental part of many people’s lives. However, there are a few instances when you could actually do without one and end up fine. When would this be?
When you have a self-insurance scheme
Self-insurance in its most basic form involves setting aside an amount of money to cover for uncertainties in life. Self-insuring individuals do not involve third party insurance company but rather set aside a certain amount per period that amounts to a lump-sum at a certain time in future that can then be used to cater for unknown eventualities. This will, however, require you to be much disciplined and have a medium to high-income level. If done well, a self-insurance pool could cater for your long term care needs.
When you have an annuity with a long-term care rider
An annuity is basically a financial product designed to accept and grow funds from a person and then on annuitization pay an amount or a series of amounts to the person after an agreed upon period of time. The period when the individual pays the funds but does not receive benefits is known as the accumulation phase of the annuity. Annuities were designed to provide income streams to individuals after their retirement and to reduce the very possible risk of scenarios where one outlives their assets.
The long term care rider gives you the added benefit of withdrawing the entire value of your account without incurring withdrawal charges and market adjustments. This way, the total value of the annuity at that time can go towards financing your long term care.
When your age will not allow
Insurance companies often deny requests to purchase long term care policies from people past a certain age limit. This is due to the increased risk that advances in age pose. An eighty-year-old man will probably need long term care sooner than a healthy twenty-five year old. It is, however, advisable to plan for old age early enough to avoid such denied requests.
When you have a hybrid LTC policy
A hybrid policy allows one the choice to link their future benefits of long-term care to a paid life insurance policy or annuity. Most of these hybrid LTC policies start with a one-off payment that could range from $50,000 to any amount. Most of these policies also provide the added benefits of electing future benefits at the onset of the policy.
Unlike traditional insurance policies, a client is guaranteed to receive their premiums back in case they never require long term care. A hybrid policy will pay for long term costs should one be required, provide a tax-deferred insurance benefit if the client does not need care and provide a full refund should a client have a change of mind. Hybrid policies are generally favorable for clients with liquid assets that are not required as a means of income in requirement and are in various ways better than the traditional LTC policies.