Why You Still Need Long-Term Care Insurance with Your CCRC Contract

Don't Make This Common Retirement Planning Mistake

You've done your research on Continuing Care Retirement Communities (CCRCs) and perhaps you're close to making a decision. But now you're wondering: "With a CCRC contract that includes care services, do I still need long-term care insurance?"

It's a common question—and one that could significantly impact your financial security. Many people assume that moving to a CCRC eliminates the need for long-term care insurance, but this misconception could cost you dearly.

The truth? For many CCRC contracts, long-term care insurance isn't redundant—it's an essential complement that provides crucial financial protection. Let's explore why.

Not All Long-Term Care Insurance Is Created Equal

If you're exploring long-term care insurance, you need to understand a critical distinction that could make or break your financial plan: how benefits are paid. There are two primary models:

1. Reimbursement Policies: These only pay for care expenses you actually incur and are billed for, up to your policy maximum. This is the most common type of policy.
2. Cash Indemnity Policies: These pay your full eligible benefit amount once you qualify, regardless of your actual expenses. You receive the money and decide how to use it—whether for formal care, family caregivers, or other needs.

Another key consideration is premium stability. Traditional policies can increase premiums over time, sometimes substantially. However, some newer policies offer guaranteed premiums that never increase, giving you financial certainty for life.

The type of LTC insurance you choose can dramatically affect how well it complements your CCRC contract—a detail that many advisors overlook.

The Critical Question: How Will Your CCRC Contract Work With Your LTC Insurance?

This is where things get interesting—and where you might save (or waste) tens or even hundreds of thousands of dollars. Your choices need to work together, not against each other.

If You Choose a Type A (Life Care) Contract:

• With a reimbursement LTC policy: You might be wasting your money. Since your CCRC fees won't increase much when you need care, there might be few additional expenses for your policy to reimburse.
• With a cash indemnity LTC policy: You'll still receive benefits when you qualify, giving you extra funds for non-covered services or other expenses—but you're essentially "double-paying" for care coverage.
• If you already have LTC insurance: A Type A contract might be redundant and unnecessarily expensive for you. Consider whether you're duplicating coverage.

If You Choose a Type B (Modified) Contract:

• With LTC insurance: Your policy becomes valuable once you exceed the included care services in your CCRC contract—essentially picking up where your contract leaves off.
• With a cash indemnity policy: You'll have more flexibility in how you use your benefits to supplement the CCRC's included services.
• The smart approach: Your LTC insurance could make a Type B contract more affordable than a Type A while providing similar comprehensive protection.

If You Choose a Type C (Fee-for-Service) Contract:

• With LTC insurance: Your policy becomes extremely valuable as you'll face significant fee increases (potentially doubling or tripling your monthly costs) when you need higher care levels.
• With either policy type: Both reimbursement and cash indemnity policies work well, though cash indemnity offers more flexibility.
• The value proposition: This combination often provides the best overall value—lower upfront CCRC costs plus targeted insurance protection when you actually need care.

If You Choose a Type D (Rental) Contract:

• LTC insurance is essential: These contracts offer few built-in protections against increasing care costs.
• Your safety net: The insurance becomes your financial protection against care costs that could quickly deplete your assets.

Long-Term Care Insurance is Crucial for Pre-Construction CCRCs

If you're considering a CCRC that won't open for several years, long-term care insurance takes on even greater importance:

1. Immediate Coverage: Your insurance provides protection during the years-long wait before the community opens
2. Protection Against Health Changes: If your health declines before opening day, your insurance gives you care options
3. Flexibility If Plans Change: If construction delays or other issues affect your CCRC plans, you maintain financial protection
4. Bridge Strategy: The insurance serves as your safety net during the vulnerable pre-opening period

Without insurance coverage during this waiting period, you're effectively going without protection at a time in life when care needs become increasingly likely.

Your Ideal Pairing: Consider Cash Indemnity LTC Insurance with a Type C Contract

For many retirees in your position, the most cost-effective combination is often:

• A Type C (Fee-for-Service) CCRC contract
• A cash indemnity LTC insurance policy with guaranteed premiums

Why might this work best for you? This pairing gives you:

1. Lower entry costs through the Type C contract, keeping more of your assets liquid and available
2. All the community benefits and guaranteed access to care services you want from a CCRC
3. Robust financial protection against the increased costs you'll face when you need higher care levels
4. Complete flexibility in how you use your benefits through the cash indemnity model
5. Lifetime premium certainty through the guaranteed premium feature, creating predictable expenses while the CCRC's fees will likely increase annually

This approach allows you to pay less upfront to the CCRC while maintaining financial protection against future care costs through a predictable insurance premium. It's essentially having your cake and eating it too.

Key Questions About LTC Insurance and Your CCRC

When evaluating how long-term care insurance works with your CCRC contract, ask these important questions:

1. Benefit Triggers: "How do the benefit triggers for my LTC policy align with the CCRC's criteria for moving to higher levels of care?" They should match closely for maximum effectiveness.
2. Documentation: "Will the CCRC provide the documentation I need to qualify for benefits under my LTC policy?" Some communities are more cooperative than others.
3. Policy Integration: "How do residents typically use their LTC policies with their CCRC contracts?" Ask to speak with current residents who have experience with this.
4. Coordination Services: "Does the CCRC provide assistance with LTC insurance claims?" Some communities have staff dedicated to helping residents maximize their benefits.
5. Outside Service Options: "Can I bring in additional care providers from outside the CCRC using my LTC benefits?" This gives you more flexibility and choice.

Your Comprehensive Care Strategy: Getting the Best of Both Worlds

You don't have to choose between a vibrant CCRC community and the financial protection of LTC insurance. In fact, treating them as an either/or proposition could leave you vulnerable.

The smartest strategy? Select the right CCRC contract type and pair it with the right LTC insurance policy to create a comprehensive plan that provides:

• The community lifestyle you desire
• Activities and amenities that keep you engaged
• Access to care when needed
• Financial protection against escalating care costs
• Predictability in your long-term budget

By understanding how different contract types and insurance models work together, you can craft a personalized strategy that gives you maximum protection without paying for redundant coverage.

Your retirement years should be both socially engaging and financially secure—and with the right CCRC and LTC insurance combination, you can achieve both goals simultaneously.

Questions? Ask us at contact@peachinsurance.net

Disclaimer: This article provides general information and should not be considered legal, financial, or tax advice. Before making significant financial decisions regarding CCRCs or long-term care insurance, consult with qualified professionals who can address your specific situation.