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The growing cost of long-term care has become a pressing concern for many Americans, with nursing home expenses averaging over $120,000 annually for a private room and in-home care costs rising steadily — and those costs are only expected to grow over time. While long-term care insurance, which covers the high costs associated with long-term care, such as nursing home stays, in-home assistance or assisted living facilities, remains a popular solution for managing these expenses, qualifying can be challenging.
For the millions of Americans who don’t qualify for traditional long-term care insurance due to pre-existing conditions, age restrictions or other health factors that make them uninsurable, the prospect of funding future care needs can seem daunting. After all, recent data indicates that about 70% of people over 65 will require some form of long-term care during their lifetime. That makes it crucial to have a financial strategy in place, whether or not traditional insurance is an option.
Fortunately, several alternatives exist for funding long-term care expenses and can provide viable pathways to ensure adequate care coverage. By understanding and leveraging these strategies, you can create a plan to meet your unique needs and protect your financial future.
Find out what your long-term care coverage options are now.
5 long-term care insurance alternatives to consider
If your long-term care insurance application is denied, these alternatives could come in handy:
Life insurance policies with long-term care riders
Life insurance policies with long-term care riders combine two types of protection: a death benefit for your beneficiaries and funds for long-term care if needed. If you require care, you can access a portion of the policy’s death benefit to cover costs. If you don’t end up using the funds, your beneficiaries will still receive the full or reduced death benefit.
This option is particularly appealing for those who can’t qualify for standalone long-term care insurance but can still secure life insurance. While these policies often come with higher premiums than basic life insurance, they offer flexibility and peace of mind. Some policies don’t require stringent health qualifications, either.
Apply for long-term care insurance coverage today.
Health savings accounts
Health savings accounts (HSAs) are a tax-advantaged way to save for medical and long-term care expenses. If you have a high-deductible health insurance plan, you’re eligible to contribute to an HSA. Contributions are tax-deductible, the funds grow tax-free and withdrawals used for qualified medical expenses — such as home health aides or nursing care — are also tax-free, and if you’re denied long-term care insurance, an HSA can serve as a supplemental fund for healthcare-related costs.
HSAs are particularly effective for this purpose if you start saving early. The annual contribution limits ($4,150 for individuals and $8,300 for families in 2024, with additional catch-up contributions for those 55 and older) may seem modest, but over time, the tax advantages and compounded growth can add up significantly.
Annuities with long-term care benefits
Annuities can be a useful tool for funding long-term care, especially for those who don’t qualify for long-term care insurance. These financial products involve making an upfront payment to an insurer in exchange for guaranteed income payments, often for life. Some annuities, known as hybrid or long-term care annuities, also include specific riders that increase payouts or provide additional funds if the money is used for qualifying care expenses.
One of the main advantages of these annuities is that they often require less stringent medical underwriting compared to long-term care insurance, making them accessible for those with certain health issues. However, they do require a significant upfront investment, and withdrawing funds early can result in penalties or reduced benefits.
Explore your annuity options online to learn more.
Medicaid planning
Medicaid is a government program that can cover long-term care for those with limited income and assets. While it’s often considered a last-resort option, it can be an essential safety net for those unable to secure private coverage. However, qualifying for Medicaid requires meeting strict financial criteria, including limits on income and assets.
To plan strategically for Medicaid eligibility, consider working with an elder law attorney or financial planner. They may be able to help you legally structure your assets to meet Medicaid requirements without sacrificing your financial security. Medicaid planning requires foresight, though, as many states enforce a “look-back period” to prevent abuse.
Family care agreements
Family members often step in to provide care for aging loved ones, and formalizing this arrangement can be beneficial for both parties. A family care agreement is a legal contract that outlines the terms and compensation for care provided by relatives. This arrangement can be more affordable than professional care and ensures your needs are met by people you trust.
To set up a family care agreement, consult with an attorney experienced in elder law. The agreement should specify the caregiver’s responsibilities, hours and payment terms to avoid misunderstandings. While this option requires careful communication among family members, it can create a collaborative, personalized care plan that aligns with everyone’s expectations.
The bottom line
Planning for long-term care can feel overwhelming, especially if traditional insurance is not an option. However, by exploring these alternatives, you can develop a comprehensive strategy tailored to your needs and circumstances. Proactively addressing potential care costs will not only safeguard your financial future but also provide peace of mind for you and your loved ones.
