Long-Term Care Insurance (LTCI)
Frequently asked questions and answers
Here are some questions and answers to help you decide if long-term care insurance is right for you.
Long-term care refers to help with what insurers call the "activities of daily living"—bathing, dressing, eating, using the bathroom and moving—associated with injuries, strokes and mental deterioration like Alzheimer's disease. Actually, the phrase long-term care may be a bit of a misnomer: someone with a broken hip, for example, may need this type of assistance for just a few months. Obviously, for short and simple problems, a family member can often provide the required care (though that often results in an onerous burden); more serious and lengthy issues require daily, in-home caregivers or care in a nursing home or an assisted-living facility.
Statistically, the answer is yes: you will probably need this type of assistance. Collectively, we're living longer, and that clearly increases the probability. According to the U.S. Department of Health and Human Services, at least 70 percent of people over age 65 will require some long-term care services at some point in their lives.
However, the statistical probability that you'll need this type of care doesn't mean you need LTC insurance. If you're quite wealthy, you may choose to pay for your care out of pocket. Others may have children who can help either physically or financially. And finally, if you have a low net worth, you may qualify for Medicaid assistance.
Long-term care, particularly if required for a truly long time (from many months to years), can be expensive. Costs vary dramatically depending on where you live. For example, according to the 2009 Genworth cost of care survey, home care services range from about $32,000 to over $50,000 per year. Nursing home care can range from about $44,000 to well over $100,000.
If the cost of long-term care could put your financial security at risk, you may want to consider LTC insurance (most health insurance policies and Medicare do not cover this type of care). It's not cheap, but it may be worth it, especially if you purchase it when you’re relatively young.
According to the 2009 National Long Term Care Insurance Price Index, the average annual long-term care premium for a single person age 55 with a $150 daily benefit for three years is $1,590. This rate doubles to $3,042 for someone aged 65.
If you decide to purchase LTC insurance, you need to shop around. LTC insurance premiums vary widely, so do some research to help gauge costs. The earlier you buy it, the cheaper it's likely to be (although you will of course be paying premiums for a longer period of time). But cost isn't the only consideration. Make sure you understand:
- The coverage (does it cover in-home care? nursing home care? both?)
- The benefit (how much will the policy pay you? how long will it last?)
- The waiting period, if any, before benefits kick in
- The policy's inflation protection (health care costs typically rise faster than the general rate of inflation)
- How benefits are paid (cash or reimbursement)