Money Matters
Understanding long-term care insurance
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As we are now living longer, one of the thorniest decisions we make is whether to buy long-term care insurance.
Unlike traditional health insurance, including Medicare, which mainly provides care to help those who are sick or disabled to recuperate, long-term care insurance kicks in when a policyholder suffers from a chronic condition and needs assistance with basic tasks such as bathing and eating.
Who should consider it?
In general, long-term care insurance makes sense for people with a net worth of $200,000 to $2 million. Those with less will exhaust their assets and qualify for Medicaid if they go into a health-care facility; those with more can fund their own care.
Long-term care is expensive. The average cost for a year in an assisted-living facility is $30,288, while home health care runs an average of $18 an hour, according to MetLife’s Mature Market Institute, the insurer’s research and policy resource center for aging issues. A year in a private room at a nursing home can cost an average of $70,000, while in major metropolitan areas it could cost more than $100,000.
Long-term care policies generally don’t kick in until you can no longer do at least two of these “activities of daily living”: bathing, dressing, eating, continence, using the toilet, and moving back and forth from a bed to a chair. Additionally, a medical professional must judge that the situation will last at least 90 days.
Benefits are also triggered if the insured has substantial cognitive impairment, such as that caused by Alzheimer’s.
Check your options
Long-term care insurance is confusing to buy. Some plans cover the cost of someone to run errands or do chores; others will pay only for a licensed aide or nurse.
There are even options for how to pay for the policy; in some cases, you pay the tab in full over a set period of time, such as the 10 years before your retirement, and your policy will remain in force for life or until benefits are used up. With others, you pay indefinitely.
With more than 100 policies on the market, it pays to comparison shop.
“Your best bet is to get quotes from at least three companies,” says Jean Chatzky, financial editor of Money Magazine.
Best time to buy?
The average age to buy long-term care insurance is 60, according to the America’s Health Insurance Plans trade association.
Some experts say that buying in your 50s can make sense. Keep in mind, however, that while the premium is lower if you take out a policy while in your 50s, you’ll likely be paying it for a much longer time. But if you wait too long, you may fail to qualify due to poor health or be priced out of the market.
KEYWORD EXCLUSIVE: MORE INFORMATION ON LONG-TERM CARE
For a listing on how to find long-term care insurance or how to use a reverse mortgage should you not qualify, click on: long-term care insurance.
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