Is Long-Term Care Insurance Worth The Cost?

Have you ever worried about medical costs consuming your savings as you age? If you live in the United States and plan to live into retirement, the answer is almost certainly yes. With the average cost for a semiprivate room in a nursing home running above $6,000 a month, it’s a real concern.

Government programs like Medicaid and Medicare can help cover some expenses of long-term care. But they don’t cover everything and to qualify, you may have to spend down all your assets.

A long-term care insurance plan can protect your assets by paying for the care and services you need when you can no longer take care of yourself.  However, all plans are not created equal, and even the best plans aren’t meant for everybody.

There isn’t a one size fits all answer to whether Long-Term Care Insurance is right for you.  It can be a critical part of your overall financial plan if used right, but it can also be unnecessary or prohibitively expensive. When shopping for a policy, talk to several companies, ask a lot of questions and be sure to understand all the terms of the policy.  Remember, Long-Term Care Insurance is only for care once you can no longer perform daily tasks for yourself. It is NOT for any other type of medical care. There are a few points to keep in mind when deciding whether to buy a policy.

Some Guidelines

1. Usually, age 50 is the time to consider a long-term care policy. Younger than that, you probably don’t need it and older than that, you may have a condition that could prevent you from qualifying or result in higher premiums. The earlier you buy the coverage, the lower the premiums should be.
2. Be sure the insurance company is financially sound. You may qualify for benefits for a long time and you want the insurance company to be around. You can get ratings reports on insurance companies from A.M. Best.
3. Review what types of expenses are covered by the policy. Some policies provide coverage for only some services, a limited period of time or only up to a certain total dollar limit. As you would expect, the more services covered, the higher the premium.
4. Get the coverage you need. Many experts suggest at least three years’ coverage. While three years in a nursing home today may cost $150,000, be sure the policy you are considering protects you against medical cost inflation.
5. Review the elimination period. This refers to the amount of time from when the condition requiring long-term care begins, to when you can begin receiving insurance benefits.  This essentially functions as your deductible.  For example, it may be 90 days of care before your insurance will begin providing coverage.
6. Be sure to understand what makes you eligible for benefits.
7. Make sure the policy is guaranteed to be renewable. This doesn’t mean that your premiums can’t rise. It just means you can always renew your coverage. Ask the company for information about its premium rate history to see how the premiums have risen in the past.