Regular health insurance, including Medicare, doesn’t pay for help with these “custodial care” tasks, except in limited circumstances. Long-term care insurance does.
Yet faced with the coverage costs, many long-term care insurance shoppers get sticker shock and give up. Here’s how to keep the price affordable.
1. Buy sooner rather than later
“The key to long-term care insurance is to apply early while it’s inexpensive,” says Kevin M. Lynch, assistant professor of insurance at the American College of Financial Services in Bryn Mawr, Pa.
You can buy long-term care insurance up to age 75 from most companies, but you’ll pay more at older ages and if you have health conditions.
Among 65-year-old applicants, 28% will be denied because of their health, Lynch says.
The ideal age to start shopping? “I think 50 is the magic number,” says Deb Newman, president of Newman Long Term Care, an independent insurance agency in Richfield, Minn.
Don’t give up if you’ve passed the half-century mark. Apply at least 60 days before your next birthday to get a price based on your current age, advises Jesse Slome, executive director of the American Association for Long-Term Care Insurance.
2. Work with an independent agent
Prices vary by insurer for the same amount of coverage. Work with an agent who can sell — not just quote — policies from different carriers, Slome says. A good agent will know which companies will likely accept you for coverage based on your health and give you the lowest price.
Get price comparisons even if you’re offered the opportunity to buy long-term care insurance through a group, such as your employer. If you’re healthy, you might find a better deal on your own.
3. Start with a budget
Decide what you’re comfortable spending for coverage, and ask the insurance agent for quotes that fit your budget, advises Brian Gordon, president of Maga Ltd., an independent long-term care insurance agency in Riverwoods, Ill. Gordon discourages people from buying a policy if they’ll struggle to pay the premium.
Work with a financial adviser to review other options if you can’t qualify or pay for long-term care insurance. Medicaid, the federal and state insurance program for people with low incomes, will pay for nursing home care, but to qualify, you have to spend down most of your money first.
4. Plan realistically
According to the U.S. Department of Health and Human Services, almost 70% of today’s 65-year-olds eventually will need long-term care, and 20% will need it for longer than five years. But few folks want to think about that.
“First of all what pops into people’s minds is the dreaded nursing home,” Newman says. Yet 80% of people who receive long-term care live at home, according to a 2013 Congressional Budget Office report. About 18% live in nursing homes and other care facilities, and 2% live in residential senior communities that offer some support but not round-the-clock supervision.
Newman encourages clients to buy enough coverage to pay for home health care for a few years. The average annual cost of a full-time home health aide is $46,332, compared with $82,125 for a semi-private nursing home room, according to the Genworth 2016 Cost of Care Survey.
Most long-term care insurance policies reimburse you for care at home or in assisted living or a nursing home. So if you buy enough to pay for home health care but instead go to a nursing home, the policy will pay at least some of the nursing home costs.
Look at costs of care in your area to estimate how much coverage to buy, Lynch advises.
5. Go for a simple vs. souped-up policy
Ask for quotes for good, better and best coverage from each company to see costs at different levels, Slome says. Avoid adding features, called riders, that you don’t need.
“Keep it a good, simple, long-term care policy without all the bells and whistles,” Gordon says.
An example is a “restoration of benefits” rider: If you need long-term care but then get better, the benefits you used are restored for a later date. But Gordon says once people start to need long-term care, they usually continue to need it.
An inflation protection rider allows your benefits to grow to keep up with inflation. Reducing the inflation protection, from, say, 3% to 1% will drop the policy price. If you’re older, say 70 instead of 55, you may be able to get by with less inflation protection, Lynch says.
A final thought
Avoid an all-or-nothing approach when buying long-term care insurance.
“Sometimes people look to insuring 100% of the cost of the care,” Gordon says. Instead, think about the costs you can handle and what you want to insure. “Don’t buy more than what you need.”
– Barbara Marquand