Long-term care isn't one-size-fits-all; if traditional insurance is out of reach, consider alternatives like employer plans, annuities, or self-funding.
Long-term care insurance may not be suitable for everyone. Approximately one in three applicants face rejection, with the rejection rate climbing to 40% for individuals aged 65 to 69. Tom Beauregard, founder of HCG Secure, highlights that many individuals struggle due to medical history disqualifications or find premiums unaffordable. Fortunately, there are six alternative options for those unable to secure traditional coverage.
An Employer's Group Plan
Some employers provide long-term care insurance as a benefit to their employees. These group plans often have more lenient acceptance criteria, allowing individuals with existing health conditions to enroll even if they were previously denied individual policies. This can provide a solution for employees who might otherwise find it difficult to obtain coverage due to their health status.
Linking Long-Term Care to an Annuity
Annuities can also serve as a strategic approach to funding long-term care needs. A deferred fixed annuity paired with a long-term care insurance rider is one option. This structure allows the annuity payout to increase—often two to three times—if the individual can no longer perform two of the six activities of daily living, such as bathing or dressing. Marc Glickman, CEO of BuddyIns, notes that some annuities do not require medical qualification for long-term care benefits, making this an appealing choice for those with uninsurable chronic conditions. However, individuals must be prepared to invest a significant upfront amount—typically $100,000 or more—into the annuity.
Short-Term Care Insurance
For those looking for a less expensive alternative, short-term care insurance can be a viable option. While not universally available, these plans generally cover care for a duration of up to one year and provide a daily or weekly benefit limit. According to Glickman, short-term plans are gaining traction among individuals who are ineligible for traditional long-term care due to poor health. This insurance is especially attractive for older adults or single women, as it does not impose higher rates on female policyholders. A 65-year-old could pay around $63 a month for up to $1,050 in weekly home care benefits. As the policyholder ages and seeks greater benefits, costs will rise. One significant advantage of short-term care coverage is that it typically does not have an elimination period before benefits commence, allowing it to cover the waiting duration required by traditional long-term care policies.
Using Life Insurance Benefits
Certain life insurance products allow policyholders to access their death benefits to pay for long-term care services while they are still alive. Policies with accelerated benefits can provide access to 70% to 80% of the face value, with some insurers permitting full withdrawals. This option enables individuals to draw from their life insurance savings when needed, effectively turning a death benefit into a funding resource for long-term care.
Self-Funding
Another approach involves self-funding for future long-term care needs. With the help of a financial planner, individuals can determine the appropriate amount to allocate toward a retirement or investment account specifically for potential caregiving expenses. Brian Gordon, president of Murray A. Gordon and Associates, emphasizes the importance of establishing a proactive plan rather than reacting in a crisis. A thoughtful assessment of which investments to tap into first can streamline access to funds when care becomes necessary.
Consider Relocating to a State with a Care Plan
Those exploring their options might also consider residing in Washington State, which has implemented a mandatory payroll tax designed to fund long-term care benefits. Set to begin in 2026, eligible residents may access up to $36,500 in benefits that cover a range of long-term care expenses. While the legislation has faced lawsuits and resistance, Howard Gleckman of the Urban Institute notes that Washington's model is being closely observed by other states. He anticipates that some form of social insurance for long-term care will eventually be adopted, whether at the state or federal level, as the costs of care continue to escalate rapidly.
In summary, while traditional long-term care insurance presents challenges for many, several alternative options exist that may provide effective coverage. Whether through employer-sponsored plans, flexible annuities, short-term policies, life insurance benefits, self-funding, or relocating to a state with established care programs, individuals have pathways to secure the support they need for future long-term care.
