Long-term nursing care can be very expensive – depending on where you live, costs can range between $60,000 and $200,000 per year.
Yet most people don’t plan for the expense, and report that they hope not to need insurance to help pay for care in their later years. That’s probably wishful thinking.
According to the U.S. Department of Health and Human Services, roughly 70% of Americans over 65 will require some type of long-term care.
Long-term health insurance is a good idea to help protect against future health care costs that Medicare doesn’t pay for, such as extended home care, assisted living and nursing care.
Here are 6 things you should know about long-term care insurance before you buy coverage:
1. Buy young. The younger you are when you buy long-term care coverage, the less expensive it will be. You’ll also have a better chance of being approved for a policy. Unlike health insurance under the Affordable Care Act, long-term care insurance is not guaranteed. If you already have a chronic condition, such as diabetes or heart disease, you’re likely to be turned down.
Experts generally suggest your mid-50s or 60s as a good time to think about buying coverage.
2. Explore all options. Don’t let the price of long-term care insurance stop you from looking for a policy.
Depending on your budget you may want to consider plans that will cover some, though not all, of your long-term care costs. There are plans that may cover $ 150 per day for three years, for example, but the benefit amount doesn’t keep up with inflation.
If you’re willing to spend more, you can buy a policy that keeps up with inflation — say 3% compounded annual growth, which is common these days.
Some insurers sell a “shared benefit plan” in which a couple shares a pool of six years of coverage that can be used as needed between spouses.
Work with a broker to find a plan that offers at least some coverage at a price you can afford.
3. Understand what’s covered. All insurance policies will require proof of how many activities of daily living you need help with – bathing, dressing, eating or using the toilet – before agreeing to cover your costs.
Experts I’ve talked to suggest buying a policy that kicks in once you need help with no more than two activities of daily living.
4. Know when coverage starts. Most policies have a waiting period during which you must pay for long-term care services on your own before insurance begins to pay. It could be 30 days or 90 days, or something in between. The longer the period you have to pay out of your own pocket, the less you’ll pay in premiums for the policy.
5. Know how benefits are paid. You’ll also want to pay attention to how the plans pay out the benefits. Some will pay you a lump sum for the allowed monthly benefit, while others require you submit expenses and then reimburse you. No one option is better than the other, but it’s good to know what to expect.
6. Work with a knowledgeable agent. Long-term care insurance is a complicated product, so it’s a good idea to work with an experienced agent. The American Association of Long Term Care Insurance recommends looking for three things in an agent:
- Someone with at least three years of experience selling long-term coverage.
- An agent who has sold a minimum of 100 long-term policies.
- An agent who works with a minimum of three or four different companies.