How to Get the Right Long-Term Care Insurance Policy

Don’t grow old without it …

Long-term care insurance is getting more expensive and complicated. It’s also harder to get.

The insurance is now not very profitable for insurance companies. People are living longer, which drives up costs. Interest rates on investments are low, which makes it harder for companies to profitably invest premiums.

Some insurance companies are no longer offering the insurance.

273/365: 09/30/2013. Money, Money, Money!

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It pays to shop around for long-term care. The American Association for Long-Term-Care Insurance says coverage that is nearly identical to a few years ago can cost almost twice as much today. For a $150 daily benefit lasting three years for a married couple age 65, one company charges $317 a month, while another charges $594.

Besides age and health, the three factors with the most impact on premiums are: the daily benefit, the length of coverage, and the inflation protection you choose.

One insurance broker says, “The new reality is, something is better than nothing. Get what’s affordable and sustainable.”

If you select $250 a day for three years, you would have an “expense pool” of $273,750 ($250 x 365 x 3). If you use less than $250 a day, the pool of funds would stretch longer than three years.

Insurance experts say inflation protection is the most crucial part of a policy. People in their 50s and 60s need to make sure their coverage keeps up with costs. Age 80 is typically when people make their first claims.

The most expensive and most widely recommended inflation factor is 5 percent per year. Your pool of $273,343 would grow to $726,343 in 20 years.

You can also choose cash and flexibility. A few insurers offer policies with cash benefits up to half your monthly allowance and require no receipts. You need documentation from the doctor saying you require help with at least two “activities of daily living.” With the cash option, you can hire family members to care for you or even move to a resort. Most long-term care policies will only pay for home care if given by a person with a nursing degree.

According to The Wall Street Journal, some retirees are turning to permanent life insurance policies and deferred fixed annuities packaged with long-term care benefits. They avoid the risk of spending their entire savings on nursing care. When the limits of long-term-care are reached, bills are paid from the life insurance or the annuity. Whatever is left goes to the beneficiary upon the policy holder’s death.