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Types of Long-Term Care Insurance

Traditional vs. Asset Based LTCi
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Traditional and Asset Based Long Term Care Insurance

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There are two types of long term care insurance; Traditional and Asset-Based. Both types have a similar structure: benefit amount, benefit period, elimination period, inflation option. Each type has its advantages and disadvantages. Which is best for you depends upon your financial preference and goals.

Traditional Long-Term Care Insurance

Traditional Long Term Care Insurance is a way to take greater control of your future while helping protect your loved ones from the impact of a possible long-term care event. This type of policy gives you choices about the kind of care you can get, including whether you will receive care at home or in a facility.


Asset-Based Long-Term Care Insurance

Asset based long term care insurance is a life insurance policy. It allows you to leverage your death benefit to pay for nursing care costs. Normally, life insurance pays a death benefit to your beneficiaries when you pass away. This money can then be used to pay for funeral and burial expenses. Also, it can cover day-to-day living expenses for your loved ones, wipe out debts, or meet other financial needs.Types of long-term care insurance.

With an asset based long term care policy, you can accelerate your death benefit payout. You can tap into benefits from the policy to pay for long-term care if the need arises.

The beauty of ABLTC is that, if you don’t need long-term care, the annuity or whole-life policy retains its value and pays out to your designated beneficiary. And many people who might not qualify for traditional LTCI due to preexisting conditions may still be able to obtain coverage.

If an asset based long term care plan is triggered, funds from the whole-life policy or annuity are applied toward long-term care expenses. Any value that’s left over gets paid out to heirs as a death benefit.

As with just about any insurance product, there are coverage caps, but the caps are usually significantly higher than the present cash value of the asset at the time the policy is issued. So, you have a lot more money for long-term care expenses than if you just surrendered an existing whole-life policy and earmarked the cash for nursing home costs.

Because the asset used for the plan retains its independent value, ABLTC plans are sometimes referred to as “combination plans” or “linked-benefit plans,” depending on the specific insurer and product.

Medicare and Long-Term Care

While Medicare is often listed as an option to pay for long term care on many websites, keep in mind Medicare WON’T pay for most LTC services. Medicare pays for medical care for senior citizens and younger people with disabilities.

Medicare does not pay for custodial care, which is not medical care which essentially makes up for over 90 percent of LTC.

Custodial care is when you need help with the things you do every day: getting out of bed or a chair (transferring), using the toilet, managing bathroom hygiene, bathing/showering, dressing, or eating. Most people who require long term care after suffering from a stroke or cognitive impairment such as Alzheimer’s or dementia need custodial care.

Kim Beckham, CLTC is a Long Term Care Insurance Specialist with ACSIA Partners, one of the largest long term care insurance agencies in the nation.
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