Combining LTCI and Self-funded Plans for Better Coverage

Self-funded plans or self-insurance appears to be the preferred method for long term care planning. After all, many are hooked by the idea of not having to worry about policy premiums and underwriting. However, is it enough? And how do you know if you have gathered enough money to self-insure for expenses that will not come until the twilight years?

 

In our previous post, Self-insurance vs. LTC Insurance: Which Works Better?, we determined the key differences between the two methods. While the one type may be proven to be advantageous for certain types of people, the other surely offers unique protection that cannot be missed.

 

Planning for long term care is not easy—it can be overwhelming and daunting most of the time—but it is necessary. And part of the key components in long term care planning essentials is to have all the important details you need to make a sound decision. Remember that you are making decisions for challenges that may come in the distant future or the next year. With this in mind, it is better to cover each of the bases now. However, the new challenge here is that many seem to think that it is an either-or situation. Self-fund long term care and forget about policies or purchase insurance and do not take other measures to find funding for care.

 

We’ve all heard the saying that you should not put all of your eggs in one basket, so our question is this: why can’t it be both? Surely two methods combined into one plan that perfectly fits your needs is better than choosing one that does not fully cover your needs, right?

 

Understanding Self-insurance

The costs of long term care services are reaching alarming rates, and many of the older baby boomers are feeling the weight of these expenses. This is pushing the younger generations to be more proactive in planning for their care. Many are choosing to self-fund their care.

 

Perhaps, the biggest appeal of self-insurance is the freedom that comes with it. In paying for your own care, you have full control of your nest egg as well as where it goes once you start receiving care. This means there are no immediate repercussions when you do not reach your quota for the month, and you do not have to worry about qualifying for a screening process.

 

Bear in mind that this method also comes with disadvantages. Various experts have stressed that self-insurance may best fit individuals who have substantial assets and finances to back them up.  Moreover, industry experts have often pointed out that while it may seem easy in the beginning to save the money that you need regularly, people simply do not have the restraint or the discipline necessary to keep it up.

 

Finding the Right Long Term Care Policy

Long term care insurance offers the support by helping older adults cover the costs of care. Like other insurance plans, these policies offer a wide range of features that you can use to customize the coverage that you pay for. Over the years, this type of plan has evolved to fit what their policyholders require. Initially, it only covers nursing home expenses, but now, it also provides for home health care, respite care, adult day care, assisted living facility, hospice care, and Alzheimer’s care facilities.

 

Despite the mixed reviews, long term care insurance policies are providing the advantages that should not be ignored. In recent studies, nearly 90% of policyholders have shared that they are satisfied with coverage that they bought. Moreover, 8 out of 10 have found filing a claim to be easy. It offers invaluable peace of mind to policyholders because they get to grow older safely, comfortably, and independently. They get to choose where they want to receive care and not have to worry about funding it.

 

However, many are understandably wary of purchasing a policy because it may also cost a great deal if not managed properly. Without proper research and the help of industry professionals in planning for a policy, the costs can also get out of hand.

 

Combining Both Methods for Better Coverage

The best option to take is to combine both methods into creating a plan that specifically suits your needs. Self-fund and be proactive about it, but also get the right amount of insurance policies to supplement that plan.

 

Creating a well-planned portfolio is necessary. For many, an ideal approach is to have 60% of safe assets and 40% of stocks. The younger ones, however, must use the time to their advantage. Dedicate a separate fund just for long term care, and be steadfast in building enough savings for the future.

 

Also, purchase the right amount of insurance policy so that it does not take up too much of your finances. Pick only the features that you are sure you will need. You may be able to determine these by researching your family’s medical history and identifying the health conditions that might be in your future. Furthermore, consult with an insurance agent and work with them in securing the benefits and features that are work best for your circumstances and budget.

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