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3 reasons long-term care insurance is better than paying out of pocket

Long-term care insurance is typically better than paying out of pocket for multiple reasons.  Unai Huizi/Getty Images

Long-term care is something that most older Americans will eventually need. And, considering the high cost of that care, it's important to prepare for it ahead of time. Failing to do so could limit your options and put undue strain on your family and friends when you need care. 

One way to address high long-term care costs is by purchasing a long-term care insurance policy, which can help cover costs for nursing homes, assisted living facilities and in-home caretakers. Another way is to save money to pay out of pocket when the need arises. Though choosing the latter may give you more control over your money, doing so could be a mistake. Below, we'll break down why long-term care insurance may be preferable to paying out of pocket.

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3 reasons long-term care insurance is better than paying out of pocket

There are a few reasons long-term care insurance is better than paying out of pocket for your care, including:

Tax benefits expand your coverage

Qualified long-term care insurance policies come with tax benefits. Not only can you deduct your premiums (up to annual, age-based limits) on your tax return, you won't pay taxes on inflation protection-related growth in the value of your policy or your benefits when you receive them. That can make a meaningful difference in the amount of money you have available to cover the cost of your long-term care when you need it. 

Take advantage of the tax benefits of a long-term care insurance policy today

You're guaranteed long-term care support when you need it 

It can be difficult to refrain from tapping into money you saved for one purpose when another financial need arises. And, if you intend on saving money to pay your long-term care expenses out of pocket, you may tap into that money from time to time. 

On the other hand, if you purchase a long-term care insurance policy, you won't be able to access your benefits until you have a qualifying long-term care need. As such, when that need arises, your benefits will be available (as long as you've paid your premiums), regardless of the financial needs that arise between now and then. 

Long-term care insurance protects your family

Life happens, and when it does, it can be easy to get off track in terms of saving in and maintaining your long-term care fund. But, if that happens, and you don't have insurance to fall back on, your family could pay the price. 

"The risk of a long-term care event is not only financial," explains Jeff Beligotti, vice president and head of long-term care solutions at insurance company New York Life. "Long-term care events can quickly deplete a retirement portfolio, result in burdensome caregiving responsibilities for your loved ones, including lost wages from taking time off work, and cause emotional distress."

Even if you intend on aging at home and leaning on your family and friends for support, long-term care insurance makes sense. It can give your informal caregivers breaks and some policies will even make it possible to pay your family and friends for the care they provide

The bottom line

At first glance, it can be difficult to decide whether it's better to purchase long-term care insurance or to save money with a plan to pay for your care out of pocket. But as you dig into the details, the benefits of long-term care insurance become clearer. 

Thanks to the tax advantages associated with a long-term care insurance policy, you could have access to more funds than if you had paid out pocket. Moreover, long-term care insurance guarantees your access to care when the need arises as long as you pay your premiums, and it can protect your loved ones. Chat with a long-term care insurance agent now about your options

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