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Deciding on Long Term Care (LTC) insurance can be complicated.
People are living longer and elder care costs are outpacing the cost of living.
Medicare will only pay for temporary stays to recover from an illness.
Most states Medicaid will only pay if you deplete most of your assets. (A spouse can keep $113,640 in assets (2012).

So the need for insurance depends on your financial status.

  • Minimal Savings - You can rely on Medicaid if single.
    If married you may want LTC Insurance, but if the payments are mor than 10% of your income it may be too expensive.
  • Moderate assets you want to pass on to heirs - LTC Insurance may be for you.
  • Significant assets (≥ $1,500,000 if married or $1,000,000 if single)- You want to consider self-insuring.
You should also consider:
Did your ancestors have chronic health porblems or other conditions that required prolonged care.
Care Cost:
2005: National average for a Private Room in a nursing home: $74,000 (Source: MetLife)
Between 2004 and 2008, nursing-home costs are projected to rise by 5.6 percent a year, and 5.9 percent for four years after that.
In 2003 nursing-home day rates range from $96 in Shreveport, La., to $420 in Alaska.
Most facilities also require an up-front fee, which may range from the equivalent of one month's charges to tens of thousands of dollars; it may or may not be partially refundable if a resident leaves.
In 2021, when today's 60-year-olds might need such care, the average rate will have risen to about $480 a day, or $175,200 annually. (Consumer Reports - CR)

Home-health aides charge $18 an hour, on average. Hiring one for eight hours a day costs $144.

Studies showing the need for long term care varied from 37% to more than two-thirds of individuals 65 and older will require some kind of long-term care."
You have to be carefull with the statistics. Some people go in temporarily to recover from an injury or illness. Their average stay is 9 mos.
The average stay for people who die in the home is 2 years. (NCPC)
The commonly quoted average stay for all is 2.4 yrs.. That doesn't jibe with the above numbers in my math.
Only 10% will need more than two years of care.
Women are more likely to spend extended periods in a nursing home.
One out of four 65-year-olds flunk the physical and are rejected for long-term-care insurance; at 75, it's one in three.

See 40 Must-Know Statistics About Long-Term Care

Medicare only pays for 100 days and after 20 days you are responsible for a co-payment (now $105 a day).

Recommendations - Insurance:
Consumer Reports stated in 2003:

"A CR investigation, for which we reviewed 47 policies, reveals that for most people, long-term-care insurance is too risky and too expensive. As with health insurance, you must keep paying to keep it in force. If premiums rise, you may have to drop the coverage, possibly losing everything that you've paid. The policy's benefits may cover only a portion of the total expense. Many policies are packed with catches that can keep you from collecting. Finally, there's no guarantee that long-term-care insurers, some of which have weak balance sheets, will be around 20, 30, or 40 years from now when you need them to pay."

"In preparing this report, we established criteria that could make a policy a worthwhile hedge against the costs of long-term care, if you can afford it. "

If you buy too young new systems for care may emerge that will not be covered by a policy.
Wait till your 50 yrs old (Sac Bee) or 65 yrs old (CR) to buy.
If you buy later than age 70, the policy will likely be too expensive.

Most experts recommend getting a policy between the age of 50 and 70.
In 2012 the average cost for a 55-year old single individual who qualified for preferred health discounts is $1,720/yr for between $165,000 and $200,000 of current coverage (coverage will increase with inflation) for a 3 year benefit period.

Premiums escalate as you age. For example in 2012, a plan that costs a 55-year-old couple $2,405 annually will run a 60-year-old couple $2,970 annually. A 55-year-old single person would pay an average of $1,480/year, 60-year-old $1,790 and a 65-year-old $2,360.

Most policies allow for premium increases. A single friend who bought insurance before she was 60 had her premium almost double at 66 and then increase again at age 68. The second increase went from $2,950/yr to $4,250/yr. A 43% increase for a 16% increase in coverage, to $152.000 per year for a nursing home or $209 per day for homecare.

If you can afford to pay part of the expense yourself, get a policy that will only pay the difference between what you can pay and the cost.
You can specify how long you want to pay yourself before the policy kicks in. 90 days is the most common.

Get at least four or five quotes from different companies that are highly rated for financial strength by leading ratings services, such as A.M. Best, Fitch Ratings, Moodys, Standard & Poor's, and TheStreet.

Over 70 percent of people today buy a 3-to-5 year benefit period,

Things to consider in a policy:

  • What does it take to qualify.
  • Does it cover home care as well as a nursing home.
  • The maximum payout and time period.
  • Cost of living/inflation increases
  • Premium increases
  • Can you get a partial refund if you cancel.

Baby Boomer's Guide to Estate & Medicaid Planning: Jon A. Iverson, 2005
The Boomer's Guide to a Great Retirement: You Can Do It!: Jonathan D. Pond: 2007

Long-term care cost and your choices " Bankrate, Inc.
Long-Term Care at Invest-FAQ
Understanding Long-Term Care Insurance - AARP, June 2012, AARP
Long Term Care | Insurance - Consumer Reports 2012
Oct 22, 2006 Sacramento Bee
Complexity in long-term care coverage, July 13, 2006, Sacramento Bee
Long Term Care at WikiPedia
2012 Long Term Care Insurance Price Index | American Association for Long Term Care Insurance (AALTCI)
Other Links:
Dodge the Long-Term Care Insurance Mess - Forbes
Medical Costs
Private Long-Term Care Insurance: The Medicaid Interaction AARP 2003
40 Must-Know Statistics About Long-Term Care

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last updated 10 Oct. 2015