Choosing the Right Long-Term Care Option


With millions of Baby Boomers reaching retirement age, many Americans are recognizing the importance of long-term care. The need for such care can be unpredictable because the effects of aging and diseases like Alzheimer’s and Parkinson’s can strike with little warning.

LTC insurance allows individuals and their families to protect against the significant cost of caring for elders. There are three common LTC insurance options. Each type carries its own risks and benefits.

LTC Policy Options

A standard LTC policy is the simplest way to protect against the risk of needing long-term care. The chief drawbacks to a LTC policy are the relatively high cost, increasing premiums and the lack of a cash value to the policy. Purchasers of LTC insurance need to plan carefully to avoid the risk of being unable to continue the policy at a later date, thus losing the investment.

A second option is a fixed annuity with LTC benefits. This investment option provides a guaranteed income stream for life and is best suited for individuals with low risk-tolerance. Compared with a long-term care policy, fixed annuities are less expensive and give a guaranteed payoff. Obtaining a rider for paying an additional percentage can increase the payoff in the long run. In addition, individuals can still access the investment, usually for a fee. However, rider fees can significantly limit the upside, particularly in today’s low-interest environment.

A third option is a life insurance policy with an LTC rider. These policies are a leading option for individuals also seeking life insurance. Purchasers select a cash-value insurance product and attach an LTC rider with specified coverage terms. Payments for long-term care are taken from the policy’s death benefit on a fixed schedule, with the remainder reverting to beneficiaries upon death. If death benefits are exhausted, the LTC policy kicks in. However, these policies can be more expensive than the others.

Ask an Expert

Whatever your situation, it’s important to consult with insurance professionals to select a policy appropriate for you and your family. Contact an experienced attorney to discuss how to invest in a policy that provides the best protection and care.

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