Choosing between Self-Insurance and Traditional LTCI
While some individuals choose to buy a long term care insurance policy, some might get an advantage out of self-insurance.
Self-insurance refers to funding the expenses of long term care through assets and other financial resources that a person owns. One method of self-insurance is accumulating savings and later using this saved money for long term care expenses, including buying medications or paying caregiver service fees.
In fact, paying out-of-pocket is advisable for people whose assets, including the home, are worth over $2.5 million. Self-insuring can be effective in states with relatively low costs of skilled nursing care, assisted living, and home health care. Wealthy individuals who live in a certain area s with more affordable long term care can also consider this approach.
An obvious advantage with self-insurance is avoiding the expenditure for LTC premiums that might end up unused even though it is known that nearly 3 out of 4 of us will need care in our lifetime**. For those who have excellent physical and cognitive health for the remainder of their lives, self-insurance is a way to ensure that the money that would end up in unused premiums can now be spent on inheritance, tuition, bills, and even post-retirement leisure.
Preparation Gives You The Upper Hand
Despite the benefits of self-insurance, affluent individuals might lose significant amounts of cash and become unable to keep up with this method after a long time. Long term care costs will continue to increase in the years to come due to inflation.
A traditional LTCI policy offers inflation protection so a client can amass even more money to a pool of insurance benefits. Riders for long term care insurance, such as shared care, help policyholders manage their finances more effectively in various ways.
One of the most useful perks that an LTCI policy can give is preparedness. Saving more than enough money to pay for the costs of care takes time. You may suddenly experience an illness or injury that necessitates immediate long term care - yet you have not accumulated enough savings to cover it. Policyholders, on the other hand, receive coverage for the duration of their benefit period without having to spend out of pocket.
A traditional long term care insurance policy is recommended for people who have insufficient assets for self-insurance but lack the eligibility for government-sponsored long term care programs.
Compromise Between These Two Options
Those who are still deciding whether to self-insure or buy an LTCI policy may want to consider a combination of these two options. This compromise involves paying for adequate - but not full - long term care coverage that costs less. After that, a person shifts to self-insurance. An example is buying a policy with three years of benefit period, and then paying out-of-pocket when that period is over.
Reversing this approach works for some people. They shoulder care expenses for a few years before relying on long term care insurance benefits.
Keep this advice in mind and choose the option that works best for your specific financial situation and your future long term care needs. Now is the time to get more information from an LTC Specialist. An LTC Specialist can find the perfect plan to fit your specific needs.
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