Long-term care (LTC) is care you require when you are unable to perform your daily tasks alone because you suffer from an injury, chronic illness, the aging process, or a disability.
The likelihood that you will need long-term care someday is fairly high. In fact, around 70 percent of Americans who are around 65 years old or older (79 percent women, 58 percent men) will eventually require some type of LTC, according to Longtermcare.gov.
Long-term Care Funding Methods
Below are four different types of funding methods if you require long-term care.
1) Personal Asset Funding
With this type of self-funding, distributions from your own financial assets are made to fund your long-term care costs. How much you actually spend is determined by how much long-term care you require. If you don’t require an extended period of long-term care, your risks won’t be much, but if your care does need to be extended for a lengthy time, it could cost you up to a million dollars or more.
This funding option might be a good choice if you don’t have a family history of health issues, if you’re able to cover the expenses should something happen, and if you have a supportive and caring network of family and friends.
You might want to ask yourself some questions before you decide on this type of funding. Questions can include:
- Are your financial resources sufficient enough?
- How will this impact your family and yourself?
- Is the risk worth it?
You really want to be certain before you make any hasty decisions on personal asset funding.
This funding option can be expensive, so keep that in mind. There have been a number of reasons why it’s gotten so pricey over the years, including:
- More rapid population increase making it difficult for insurance companies to provide the service
- Improvements in medical care and medicine which increase the senior and baby boomer generation population
- Inflation rates
How traditional LTC insurance funding works is you pay a non-fixed annual premium. Keep in mind, this premium is subject to increase later on. This policy will pay either a daily or a monthly benefit for your long-term care. If you don’t use it, you are not refunded the premiums you have already paid.
3) Hybrid Insurance
This long-term care funding option is asset based. It combines life insurance annuity with long-term care funding. When you require long-term care, you can withdraw funds from your policy and when your funds run out, your insurance company will pay for care. In the event of your death, if you did not require costly long-term care, a death benefit will be paid to your heirs.
This is the least desirable type of funding, but the most common. Qualifying for this funding option will depend on the state you reside in. If you have little savings and are entering retirement or if you can’t qualify for long-term care insurance because of health problems, Medicaid could be a good option for you. However, with Medicaid, you don’t get to pick where you will receive long-term care. It could end up being in a county facility. Also, reimbursements through Medicaid are typically lower than the long-term care facilities’ costs. You may get priority admission and a higher level of care with self-funding options.
Getting older comes with certain necessities and long-term care might end up being one of them. Therefore, it’s important that you prepare accordingly with the methods mentioned above to ensure you secure yourself financially in the future.