Deciding Whether to Buy Long-Term Healthcare Insurance

A few decades ago, when an elderly person needed healthcare assistance, she relied on her extended family. However, society has changed. If you can’t take care of yourself and you don’t have any family members around to provide for your care, you may choose home healthcare, adult daycare, assisted-living facilities, and nursing homes. Unfortunately, obtaining these services for any length of time requires a substantial amount of money.

If you or your spouse need long-term care for even a few weeks, let alone a few years, your family’s financial plans may be devastated. Few people are able to self-insure (pay out of their own pockets) for the cost of long-term care. And don’t count on the government to step in and cover these costs for you. Medicare provides a very minimal benefit. Medicaid is the only government program that provides funds to help cover long-term care expenses, but to qualify for Medicaid, you have to be nearly broke.

Knowing whether you'll need long-term care is hard to say. The current estimate says that about a third of men and about half of women over age 65 are expected to need two years or more of long-term care assistance during their lifetimes. Can you afford to pay for this type of care out of your retirement nest egg? If so, you can self-insure. If not, you have two primary options:

• Take your chances. Maybe you’ll be one of the fortunate ones and not require long-term care assistance, or possibly your extended family will provide the care you need.
• Buy long-term care insurance. Long-term care insurance is insurance you purchase to help offset the cost of long-term healthcare.

Long-term care insurance doesn’t make sense if you don’t have enough income to afford the premiums or if you don’t have many assets to protect or a desire to protect them for your heirs. But if you have substantial assets and income and want to protect them for your heirs, or if you just don’t want to depend on others to provide for your care or support, long-term care insurance makes sense.

If you wait to buy long-term care insurance, you increase the chances of being deemed uninsurable. However, the longer you wait to buy the insurance, the less money you’re going to spend on insurance premiums before you might receive benefits.

For example: If you purchase insurance in your 40s, you may pay premiums totaling over $100,000 before you actually begin to claim benefits — if you even need to claim benefits at all. But if you die in your sleep at home at age 90, then you’ve spent over $100,000 in long-term care insurance premiums, and you didn’t need the coverage.

As you can see, you have to take on risk of some sort no matter when you purchase long-term healthcare insurance. You just have to weigh the risks and choose which option makes you most comfortable. The Evaluating a Long-Term Care Policy worksheet included here lists items to review for each of the long-term care insurance policies you consider.

Click here to download and print the Evaluating a Long-Term Care Policy Worksheet.

After deciding that the long-term care insurance is appropriate for you, but you still aren’t sure about paying the cost and want to consider ways to reduce the total cost of coverage, check out the following tips:

• If available, purchase a long-term care insurance group policy through your employer.
• Consider electing a 90-day waiting period, rather than a 30-day waiting period, before the benefits begin. This option can reduce your premiums by up to 30 percent.
• If you’re married or in a long-term committed relationship and both of you can benefit from long-term care insurance, look into buying a joint policy for the two of you.
• Rather than buying a policy that provides a daily benefit equal to the cost of nursing home facilities in your area today, you may want to consider purchasing a lesser dollar amount and self-insuring the balance.