Alternatives to Long Term Care Insurance

Should you decide that long-term care insurance is not a good fit for you, the following options might help you prepare or pay for long-term care:

Savings and Investments -- People who have 25 or more years to plan ahead might set up a savings or investment plan that would help them to pay for long term care services should they need them. If you have an IRA or a 401k plan, it might help. However, remember that you also need to prepare for other costs in retirement and that you might need long term care even before you retire.

Home Equity -- Homeowners can raise money toward long term care costs by selling their home and moving to less expensive quarters. They also can look for a "reverse mortgage" to raise cash. A reverse mortgage is a loan based on the home's value. In most cases, you don't need to repay the loan as long as you live in the home.

Continuing Care Retirement Community -- People who can afford to do so can buy into a continuing care retirement community (CCRC) where they have access to long term care services if they need them.

Other Housing Arrangements -- Shared housing with supportive services might be available.

Life Insurance -- You might have a rider on your life insurance policy that allows you to use "living benefits" or an "accelerated death benefit" to pay for long term care. Similarly, you might be able to take a loan on your life insurance policy or to withdraw a portion of its cash value. In addition, you might arrange for a "vatical settlement" -- a cash lump sum, usually for terminally ill people, in exchange for the death benefits of your life insurance policy. However, your life insurance is an important asset, and if possible, you should avoid reducing its value. Both life insurance and long term care insurance share the same goal -- to protect your assets. Therefore, you should be very careful about reducing the value of your life insurance.

Medicaid -- For some people, Medicaid is an alternative to long term care insurance. You don't need long term care insurance if you now are eligible for Medicaid or if you will be eligible for Medicaid soon after entering a nursing home.