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

Photo (cc) by Jo Jakeman

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 61 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 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 University 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 United States is close to $7,000 monthly, and that estimate was from 2010. 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 $7,000 monthly expense ($84,000 a year) 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 only 20 days, coincidentally the exact 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 $161 per day. So for a stay of 100 days, the out-of-pocket expense would be $12,880. Not chump change, but also 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.

Got any words of wisdom you can offer for this week’s question? Share your knowledge and experiences on our Facebook page.

About me

I founded Money Talks News in 1991. I’m a CPA, and over the years I’ve also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate. Got some time to kill? You can learn more about me here.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

12 Ways to Never Pay Full Price for Anything
12 Ways to Never Pay Full Price for Anything

Stop paying retail prices. Here are plenty of ways around that.

2-Minute Money Strategy: How Should I Invest My Retirement Savings?
2-Minute Money Strategy: How Should I Invest My Retirement Savings?

If retirement is on the horizon, you can’t afford to take too much risk, but you also need to make as much as possible. Here are your options.

5 Ways Social Security Will Change in 2021
5 Ways Social Security Will Change in 2021

These adjustments will affect both workers and retirees in the new year.

7 Kitchen Gadgets That Make Healthy Cooking a Breeze
7 Kitchen Gadgets That Make Healthy Cooking a Breeze

These small appliances and cooking aids make healthy eating easy — and they’re all available on Amazon.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

How to Buy Gas At Costco Without a Membership
How to Buy Gas At Costco Without a Membership

The warehouse club often has some of the cheapest gas in town. Here’s how you can get it as a nonmember.

10 Things to Stop Buying If You Want a Clutter-Free Home
10 Things to Stop Buying If You Want a Clutter-Free Home

If you like to keep things simple, avoid these purchases.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Vacuums from this brand can last a half-century, if not longer — and they’re hot on the resale market.

A Simple Way to Silence Robocalls Today
A Simple Way to Silence Robocalls Today

A few steps can keep your phone from ringing when a spammer calls.

This Company Makes the Best Tires in America
This Company Makes the Best Tires in America

Driver satisfaction with tires is at an all-time high, but one brand stands out.

Can I Switch to Spousal Social Security Benefits When My Ex Dies?
Can I Switch to Spousal Social Security Benefits When My Ex Dies?

Knowing when to claim can help you maximize benefits.

36 Things That Will Be Obsolete Soon
36 Things That Will Be Obsolete Soon

The writing is on the wall for dozens of things we have grown up with.

17 Surprising Things You Can Sell for Extra Money
17 Surprising Things You Can Sell for Extra Money

You probably don’t realize these items are worth decent cash.

8 Things You Should Always Buy on Amazon
8 Things You Should Always Buy on Amazon

The giant retailer shines when it comes to these things, from basics to hard-to-find specialty goods.

This Health Issue Can Hint at Dementia Years in Advance
This Health Issue Can Hint at Dementia Years in Advance

One type of pain is especially associated with cognitive decline.

8 Federal Income Tax Breaks for Homeowners
8 Federal Income Tax Breaks for Homeowners

Some of these deductions and credits are available to a wide swath of homeowners.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Ways to Fill Your Pantry With Free Food
5 Ways to Fill Your Pantry With Free Food

Anyone can take advantage of these resources.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

10 Types of Retirement Income That Are Not Taxable
10 Types of Retirement Income That Are Not Taxable

There are lots of things Uncle Sam can’t touch — so long as you play by the rules.

6 Reasons You Should Stop Hiding Cash at Home
6 Reasons You Should Stop Hiding Cash at Home

Stashing money around the house is anything but harmless.

These 5 States Are the Most Expensive Places to Retire
These 5 States Are the Most Expensive Places to Retire

If you expect to have modest retirement income, you may want to avoid spending your golden years here.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.