Worried about the cost of winding up in a nursing home or requiring professional at-home care during your golden years?
Long-term-care insurance has become increasingly more expensive, driving many seniors out of the market. The good news is that annuities with “nursing home riders” are now available that can help pay for the nursing home costs.
How to Use an Annuity to Replace Long Term Care Insurance
Can Annuities replace Long Term Care Insurance? Long-term care and lifetime income provisions built into hybrid annuities or achieved with optional riders vary in design. Some are a more complete answer, and some help supplement a potential extended care need. Also, all of this is accomplished with guarantees, avoiding any and all market risk.
As you may be aware that the indexing portion of the hybrid income annuity uses a popular stock index offering potential market upside with absolutely no downside market risk, in addition it can also create a lifetime income and supplement a long term care need! So, this essentially creates a unique win-win-win situation.
So how do these hybrid annuities work for long term care? Although there are many differences in the hybrid annuity themselves, the basic premise is that the contract allows for growth on one’s money while providing a long term care solution and easier way to qualify for a long-term care benefit. The hybrid chassis is a fixed index annuity, in that it will provide safety, growth and a lifetime of income. In addition to that, there is also a long-term care component that can be built into the hybrid annuity contract.
In some cases, the long-term care rider on the account means that the purchase will require some form of medical underwriting for approval. This may entail a health questionnaire and possibly a physical examination.
Once approved, and if long-term care services are needed in the future, initially a portion of the cash account value from the hybrid annuity may be used to pay for those long-term care needs. The long-term care coverage in some hybrid income annuities may be determined based on the amount of coverage that is selected when making application for a hybrid annuity.
Depending on the issuing insurance company, the company may offer a payout of between two and three times the initial policy value, typically paid out over two to four additional years after the annuity cash account value is depleted. As an example, if one were to deposit $100,000 into his or her hybrid annuity and selected a benefit limit of 300 percent and a four-year long-term care benefit rider, then they would essentially have an additional $200,000 over and above his or her initial $100,000 deposit that could be used for long-term care expenses––even after the initial $100,000 of annuity policy value was depleted! So in other words, for his or her $100,000 deposit, they could actually end up with a potential payout for long-term care expenses of $300,000.
Another method is referred to as a Long Term Care "Doubler" or a Home Health Care "Doubler" which essentially allows the lifetime guaranteed income to be doubled for a limited time such as five years or with some annuities for the entire duration of the long term care stay.
In addition, due to the Pension Protection Act of 2006 that became effective in January 2010, he or she may receive some of these long-term care benefits from his or her annuity on a tax-free basis. This offers considerably more value than if taxes were due on these long term care distributions.
Note: the above method is used when planning in advance, If your in need of nursing home care now, contact us today, we can show you how to protect your assets and qualify for Medicaid. Medicaid can pay your long term care costs once qualified.
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