Ask Stacy: Should I Have Long-Term-Care Insurance?

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When it comes to insuring against disaster, you’ve definitely got to cover your car, home and health. But what about insuring for something a lot more likely than a car wreck, house fire or disease — old age?

Since most of us will grow old, and many of us will end up needing skilled nursing care, you’d think long-term-care insurance would be a must-have. Which leads us to this week’s reader question.

I liked the article on disability insurance. Can you help explain long-term-care insurance? Who needs it? When to buy it? Who has the best policies? Thanks. – Patti

Glad you liked the article on disability insurance, Patti. I’m also glad you asked about long-term care. I’m turning 59 this summer — a bit past the prime age to start this type of coverage — so it’s something I’ve been thinking about lately myself.

I’ll lay out the basics about long-term-care insurance, then reveal the path I’ve personally chosen, as well as the logic behind it.

The depressing reality

There are two reasons everyone has to at least consider long-term-care insurance. The first is because it’s not unlikely you’ll one day need long-term care. The second is because if you do require it, it could bankrupt you.

Statistically, the odds of avoiding a nursing home stay aren’t great. According to The Wall Street Journal, researchers at Georgetown said 70 percent of those 65 and older will need long-term care, either at home or in a nursing home.

And the cost is staggering. According to the U.S. Department of Health and Human Services, the average cost for a private nursing home room in the U.S. ranges from $55,000 to more than $250,000 annually, depending on the state and facility. And the cost to insure against that expense? According to the Journal, the premiums for long-term-care insurance for a 55-year-old couple average $3,275 annually.

These numbers can be depressing. After all, 70 percent is pretty high odds. And who can afford either the $55,000-plus annual expense or the $3,000-plus annual premium?

It may not be as bad as it looks

Feeling down? It may not be as bad as it appears.

First, while the stats quoted above suggest 70 percent of seniors will ultimately need long-term care, they don’t prove they’ll require it for vast amounts of time.

According to the Centers for Disease Control and Prevention, the average length of a nursing home stay is a bit over two years. But for many it’s much shorter. Toward the end of his life, my father required nursing home care to recover from a fall. But he required it for 20 days, coincidentally the precise number of days covered by Medicare. In fact, both of my parents are now gone and neither paid a dime for long-term nursing home care.

In addition, even for those requiring it, many Americans won’t pay, or won’t pay much. As I said, Medicare often pays entirely for the first 20 days. Days 21-100 require coinsurance of $152 per day. So for a stay of several months, the out-of-pocket expense would be $12,160. Not chump change, but certainly not worth an annual premium in the thousands.

Then there’s Medicaid, which often picks up where Medicare leaves off. While only those with few assets qualify, that would include many American seniors.

Who should get it?

At the end of the day, there’s no definitive answer. Rich people might as well buy it, while those who can’t afford it will be forced to let it go and hope for the best. Those in the middle need to consider a variety of factors, including lifestyle, genetics, resources, risk aversion, and a desire to leave an inheritance. All these factors, and more, will play into the final decision.

As for me, while this is a decision I may someday regret, at this moment I’m not inclined to pay for long-term-care insurance. Other than my wife, I have few heirs. While I hate the thought of paying for long-term care, I’ll most likely have the resources to do so. Both of my parents were Alzheimer’s-free and avoided nursing homes, as did their parents. Finally, my wife is much younger than me, and is an adult nurse practitioner, so I theoretically will have help close by.

Note that many of these things can change in the blink of an eye and, more importantly, are unique to my specific situation. Yours will likely be vastly different. So if you’re in your 50s, spend an hour or two checking out LongTermCare.gov, the National Association of Insurance Commissioners Long-Term Care Shopper’s Guide and the American Association of Long-Term Care Insurance website. Then get a few quotes, think it through and make the best decision you can.

Important: If you can potentially afford to pay the premiums, the earlier you decide, the better. Annual premiums for those in their mid-50s are much lower than for those in their mid-60s, so procrastinate long enough and you may price yourself out of the market. In addition, if you develop health issues while you’re waiting, you may not be able to get it at all.

How to shop for it

Like other types of insurance, premiums vary widely, so this is an expense you’ll want to shop hard. You should check with both independent agents and company-specific ones. You should seek only the financially strongest companies that have been around for a long time because this is something you can pay for decades before using it.

Other things to keep in mind:

  • Inflation. A policy benefit that grows with inflation will cost more — according to the Journal, up to 50 percent more — but not getting it could mean an inadequate payout decades from now.
  • Rising premiums. When you buy a policy, it should come with stable premiums. But in response to rising costs, some carriers have increased premiums in recent years, including for existing policyholders. Before buying a policy, you should be reasonably certain you’ll be able to keep paying the premiums, both before and during retirement.
  • Exclusions. Like any insurance, this type could come with exclusions that could render it useless in some situations. The fine print counts. Read it.
  • Shared benefits rider. This allows either party in a couple to use the other’s benefit. Since it essentially doubles the available payout for each individual, it could be an effective and inexpensive addition.
  • Waiting period. Also known as the elimination period, as with disability insurance, this refers to the amount of time that must pass before benefits start. The longer the waiting period, the lower the premium.
  • Who provides the care. Home care is less expensive than a skilled nursing facility. But some policies require specific licenses before they pay. For example, some policies will only reimburse for “home health care” agencies, which provide skilled nursing care. But if all you need is help with bathing, getting dressed, etc., a “home care” agency could suffice, and typically costs less.

In conclusion, Patti, for both our sakes, I wish the decision about long-term-care coverage was cut and dried. It isn’t. Like many decisions we face as we get older, all we can do is learn what we can, weigh the risks and do our best.

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter. If you’re not subscribed, fix that right now by clicking here.

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

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Comments & discussion

We welcome your opinions, but let’s keep it civil. Like many businesses, we reserve the right to refuse service to anyone. In our case, that means those who communicate by name-calling, racism, using words designed to hurt others or generally acting like an uninformed bully. Also, comments that include links to email addresses or commercial websites typically aren't posted. This isn't a place to advertise your business.

  • Mr. C. Grumpkin

    Thanks for the well written and lucid article. And also for the pointer links.

  • bigpinch

    Fifteen years ago, my now 82-year-old mother bought long-term care (LTC) insurance from a major carrier. It was the year that my father died. I’m glad that she did. She has Alzheimer’s Dementia (AD). I am the only one of her two sons capable to dealing with the logistics of her life. I live in Texas, she lives in Georgia.
    When she developed Alzheimer’s and it became evident that she could not care for herself, I arranged for her to move into a small assisted living facility in the town where she’s lived for the last 40 years. She has extended family there and friends from her church a couple of whom even live in the same facility. Since my wife has health issues of her own, since our home is small, and since the closest similar facility is about 40 miles from where we live, I reasoned that she was better off where she was than if I had moved her.
    The long-term care insurance pays the cost of her room, assistance in the facility and sees to it that she gets to and from her medical appointments which are frequent. She is in better health, now, than she was before she moved in but the AD is insurmountable.
    The LTC policy is not extravagant in its provisions. One of the outstanding features of it is that while the beneficiary is confined to the facility, the premiums are waived which is a great help. My father was a career enlisted military man who never made a lot of money but did provide for my mother quite well, under the circumstances.
    I say all of this to give you a good picture of the circumstances because everyone’s circumstances differ and what works for my mother may not work for you. I say, unequivocally, that the LTC insurance is a godsend. However, it isn’t as simple as that.
    I don’t make it a habit to go around damning all insurance companies, just those with which I’ve had personal experience. The provider of my mother’s LTC policy has been absolutely horrible to work with. First they refused to pay the benefit because, they said, my mother didn’t have dementia, she was just of sub-normal intelligence. They sent a hack nurse around to prove it and I had to nearly move heaven and earth to refute her finding. I will spare you the details but I found my Med Lab Tech education quite helpful. The company loses paperwork and has unrealistic deadlines resulting in the denial or delay of payment.
    The management and staff of the assisted living facility have been invaluable in helping me keep this ox out of the ditch but between the insurance company and every other Tom, Dick, and Harry trying to take advantage of my mother’s situation, I have taken on a part-time job of being my mother’s personal advocate.
    And that is the piece of experiential wisdom I offer. LTC insurance is good. You probably ought to get it if you can (I can’t) but before you have to use it while you are incapable of tending to your own business, think about who’s going to see to it that you get the benefit you’ll be paying for. It isn’t automatic. Your insurance salesman isn’t your friend, they advocate for the insurance company when they start writing the checks.

  • Jeanne T.

    Also, many LTC insurances are factored to age 100. You can buy less if you just pay for 10, 25 or 30 years.

  • Jeanne T.

    It’s very important to state by what age the LTC insurance must be purchased. My mother purchased at the top limit, 82, top limit at that time, paid $400/mo for 10 yrs and then had her move in with me. More factors to consider!

  • Samantha Stein

    Insurance policies are created to minimize their losses because of unforeseen events and also to help people manage their risks. This time around consumers have variety of insurance products to choose from such as auto insurance and home insurance. There is also a policy for older adults who will need assistance in carrying out their ADLs or Activities of Daily Living like eating, bathing, dressing and toileting. Long-term care insurance is on the expensive side and Stacey is right, people stay away from this insurance product because of its cost. The cost of long term care insurance is around $1,000 to $8,000 annually according to http://www.ltcoptions.com/long-term-care-insurance-costs/. Another reason why people don’t consider this is because they thing they will not need this policy. In my opinion, buy this policy if you have enough funds and besides there are effective ways to bring down the rates. About 7 out of 10 of people who are turning 65 and those who are older will require long-term care and therefore will need the coverage. It’s not really about who needs long-term care insurance but who can afford its high cost.