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Understanding Long-term Care Insurance

Conflicting reports about the reform and possible expansion of Medicare have left many elderly Kentuckians wondering if they need supplemental and long-term care insurance.

Medicare does not cover the costs of custodial nursing-home care or prescription drugs.

Do I need long-term care insurance?
Ask yourself questions such as these: Does your medical history make it likely you’ll need months, or years, of care? Can you afford to keep up payments if premiums increase 10 percent annually over 10 years? Do you have more than $75,000 in assets, not counting house and car?

If your answers are “Yes,” then begin shopping around for a policy that offers care options from home care to nursing homes, a daily benefit applicable for your area, inflation protection, and the longest benefit period you can afford. Policies can range from about $1,000 a year to $4,000 or more and most will be adjusted annually for inflation and/or the age of the insured.

Dollar-per-day cost
The most important thing you are purchasing is the dollar-per-day that will go toward your eventual care. Many insurance agents suggest using a figure of $140 to $150 a day, and then count on paying any difference out of your own pocket to keep the premiums down. (On average, a year in a for-profit nursing home in Kentucky can run upwards of $30,000.)

You’ll also need to decide how many years to insure, with choices ranging from two years to lifetime. The average nursing home stay is 2-1/2 years, with the chance of longer stays higher for women than for men, according to the Health Insurance Association of America. Nearly 50 percent of Kentuckians age 65 and older will spend time in an extended-care facility.

Comparing levels of care
In trying to determine the per-day benefit to shoot for, visit some facilities and see what they have to offer and the comparable costs. For example, there’s skilled nursing care, which is in a hospital-like setting and is available 24 hours a day.

Then there are assisted-living facilities, which offer daily meals, help with bathing and dressing, and some nursing services.

At the top of the scale are continuing-care retirement communities, where residents live in an apartment and then move to an assisted-living unit or a nursing facility if their needs change.

When & whether to buy
Long-term care isn’t just for the elderly, though: 40 percent of people receiving long-term care today are younger than 65.

So when should you buy a policy? Insurers will say the earlier the better. However, Weiss Ratings, an insurance-rating service, found that age 60 is optimal. Before age 60, you could spend years paying premiums on a plan that “could be obsolete by the time you need it,” according to Weiss. Wait too long after 60, though, and rates rise quickly. And you may not qualify at all, if you become ill.

Beyond the issue of which policy to buy lies the larger question of whether or not you need long-term care insurance, says the American Institute for Economic Research. Rather than starting paying premiums before age 55, the educational organization says that “in most instances you would be better off” to put the money into an interest-bearing savings account.

Other experts say you don’t need coverage if you are worth $1 million or more; also, forget coverage if you’re worth less than $200,000 because you don’t want to start paying the costly premiums if you won’t be able to afford them the rest of your life. Medicaid probably would kick in when the money runs out.

AARP’s Health Care Options, (866) 654-5898, with plans underwritten by Metropolitan Life and United HealthCare
Long-Term Care Quote, online at, for quotes on a variety of products
A Shopper’s Guide to Long-Term Care Insurance, published by the National Association of Insurance Commissioners, available free online at, (866) 654-5898, with plans underwritten by Metropolitan Life and United HealthCare

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