New York Estate Planning & Elder Law Blog
As many seniors reach retirement age their health can begin to decline. Yet, very few seniors have any kind of plan or coverage for chronic or long-term illness. This happens for a variety of reasons – some believe that they will pass away before this type of coverage is needed and others do not wish to think of the possibility of needing this level of care. Long-term care insurance policies as well as hybrid long-term care policies can help protect seniors, and their financial well-being, if they suffer from a long-term illness.
Necessity of Long-Term Care Coverage
As people live longer and the average age of the elderly increases, many illnesses that were once considered fatal are now manageable. Over half of all seniors will deal with some kind of chronic illness, but fewer than twenty percent have long-term care coverage. In addition, with the cost of long-term care services reaching as high as $100,000 per year, an extended or chronic illness could be financially devastating.
Alternatives to Typical Long-Term Care Insurance
One of the problems with long-term care insurance is that by the time a senior is in need of the coverage, they either have difficulty qualifying or it is too expensive. Insurance carriers are trying to rectify the issue by offering hybrid policies. They combine a life insurance policy with a long-term care component.
Another option that has been offered to seniors is a hybrid annuity. These work similarly to a hybrid insurance policy, but offer double or triple distributions in order to help seniors pay for long-term care services like a home healthcare aide or a nursing home stay.
Benefits of Long-Term Care Alternatives
An added benefit of the hybrid insurance and annuity policies is that these products can be more lenient in their qualifications and standards, making it easier for seniors to obtain them. In fact, some policies are not underwritten at all, so for elderly individuals already suffering from a chronic illness, these options are a useful solution.
Another benefit of these alternative products is in regards to the premiums. Many seniors are nervous about purchasing long-term coverage because they fear that they will die, leaving thousands of dollars in premiums that will never be used. With a hybrid product, the long-term care benefit is tied to the life insurance policy. This means that if the client dies without drawing on the benefits, it passes to the heirs tax free.
Of course, all of these hybrid products are different and come with varying terms depending on the provider. An experienced elder law and estate planning attorney will be able to go over the options and help figure out which plan would fit best.
Ultimately, these long-term care alternatives can provide seniors with a safety net in case they fall victim to a long-term or chronic illness after retirement. More importantly, it can give seniors peace of mind knowing that they are covered for this type of illness, that they will not run out of money, and that they will not need to rely on their children for financial support.