4 Considerations When Shopping for Long Term Care Insurance

A person turning 65 years old today stands about a 70 percent chance of needing long-term care at some point in their lifetime*. Twenty percent of people will need nursing care for longer than five years*. With the cost of nursing homes or home health aides rising each year, this is a very real financial risk we must all address as we plan for retirement. So, if you’re considering long term care insurance, these four steps can get you started.

Assess your risks. As with any form of insurance, you should carefully weigh your individual risks. What is it, exactly, that you’re insuring against? Obviously you can’t predict the future with 100 percent accuracy, but you’ve likely been given plenty of clues as to possible outcomes. Consider your current health, your parents’ longevity, family history of medical conditions, your lifestyle, availability of family caregivers, and your own preferences for nursing care in the event that you need it.

Evaluate the potential cost. The national median rate for a semi-private room in a nursing home is $220 per day. A private room might run about $250 a day. The price of home-based care can vary wildly, depending upon the cost of nursing care in your area and the availability of family members to help. Now compare the potential cost of nursing care with your own budget. How much could you cover on your own, and therefore how much insurance do you need?

Consider the terms. Like any type of insurance, long term care insurance policies come with certain stipulations such as waiting periods before benefits begin, or deductibles. In this case, the waiting period and deductible are combined into something called the “elimination period”. This means when you do need nursing care, you will pay the cost for a period of time before benefits kick in. A common elimination period is 90 days, during which time you are responsible for the cost of your care. Policies with shorter elimination periods usually cost more, whereas policies with longer elimination periods can charge lower premiums.

There will be other terms to consider, such as the benefit period (usually a number of years), inflation protection, and so on. Analyze each of these terms carefully.

Buy coverage early. For each year that you wait to purchase long term care insurance, premiums will rise. Considering a policy in your fifties, while you’re planning for retirement, is usually a smart move.

These steps are just a general guide, and certainly do not provide everything you need to know about this important decision. Let’s discuss long term care insurance at your next appointment, and we’ll help you decide if this type of coverage is right for you.