If you\u2019re wealthy, you\u2019ll be able to afford help in your home or care in an assisted living facility or a nursing home. If you\u2019re poor, you can turn to Medicaid for nursing homes or aides at home. But if you\u2019re middle-class, you\u2019ll have a thorny decision to make: whether to buy long-term care insurance. It\u2019s a more complex decision than for other types of insurance because it\u2019s very difficult to accurately predict your finances or health decades into the future.<\/p>\n

What\u2019s the difference between long-term care insurance and medical insurance?<\/strong><\/p>\n

Long-term care insurance is for people who may develop permanent cognitive problems like Alzheimer\u2019s disease or who will need help with basic daily tasks like bathing or dressing. It can help pay for personal aides, adult day care, or institutional housing in an assisted living facility or a nursing home. Medicare does not cover such costs for the chronically ill.<\/p>\n

How does it work?<\/strong><\/p>\n

Policies generally pay a set rate per day, week, or month \u2014 say, up to $1,400 a week for home care aides. Before buying a policy, ask which services it covers and how much it pays out for each kind of care, such as a nursing home, an assisted living facility, a home personal care service, or adult day care. Some policies will pay family members who are providing the care; ask who qualifies as a family member and whether the policy pays for their training.<\/p>\n

You should check to see if benefits are increased to take inflation into account, and by how much. Ask about the maximum amount the policy will pay out and if the benefits can be shared by a domestic partner or spouse.<\/p>\n

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How much does it cost?<\/strong><\/p>\n
In 2023, a 60-year-old man buying a $165,000 policy would typically pay about $2,585 annually for a policy that grew at 3% a year to take inflation into account, according to a survey by the American Association for Long-Term Care Insurance, a nonprofit that tracks insurance rates<\/a>. A woman of the same age would pay $4,450 for the same policy because women tend to live longer and are more likely to use it. The higher the inflation adjustment, the more the policy will cost.<\/p>\n
If a company has been paying out more than it anticipated, it\u2019s more likely to raise rates. Companies need the approval of your state\u2019s regulators, so you should find out if the insurer is asking the state insurance department to increase rates for the next few years \u2014 and, if so, by how much \u2014 since companies can\u2019t raise premiums without permission. You can find contacts for your state\u2019s insurance department through the National Association of Insurance Commissioners\u2019 directory<\/a>.<\/p>\n
Should I buy it?<\/strong><\/p>\n
It\u2019s probably not worth the cost if you don\u2019t own your home or have a significant amount of money saved and won\u2019t have a sizable pension beyond Social Security. If that describes you, you\u2019ll probably qualify for Medicaid once you spend what you have. But insurance may be worth it if the value of all your savings and possessions, excluding your primary home, is at least $75,000, according to a consumer guide<\/a> from the insurance commissioners\u2019 association.<\/p>\n
Even if you have savings and valuable things that you can sell, you should think about whether you can afford the premiums. While insurers can\u2019t cancel a policy once they\u2019ve sold it to you, they can \u2014 and often do \u2014 raise the premium rate each year. The insurance commissioners\u2019 group says you probably should consider coverage only if it\u2019s less than 7% of your current income and if you can still pay it without pain if the premium were raised by 25%.<\/p>\n
Many insurers are selling hybrid policies that combine life insurance and long-term care insurance. Those are popular because if you don\u2019t use the long-term care benefit, the policy pays out to a beneficiary after you die. But compared with long-term care policies, hybrid policies \u201care even more expensive, and the coverage is not great,\u201d said Howard Bedlin, government relations and advocacy principal at the National Council on Aging.<\/p>\n
When should I buy a policy?<\/strong><\/p>\n
Wait too long and you may have developed medical conditions that make you too risky for any insurer. Buy too early and you may be diverting money that would be better invested in your retirement account, your children\u2019s tuition, or other financial priorities. <\/strong>Jesse Slome, executive director of the American Association for Long-Term Care Insurance, says the \u201csweet spot\u201d is when you\u2019re between ages 55 and 65. People younger than that often have other financial priorities, he said, that make the premiums more painful.<\/p>\n
When can I tap the benefits?<\/strong><\/p>\n
Make sure you know which circumstances allow you to draw benefits. That\u2019s known as the \u201ctrigger.\u201d Policies often require proof that you need help with at least two of the six \u201cactivities of daily living,\u201d which are: bathing, dressing, eating, being able to get out of bed and move, continence, and being able to get to and use the toilet. You can also tap your policy if you have a diagnosis of dementia or some other kind of cognitive impairment. Insurance companies will generally send a representative to do an evaluation, or require a doctor\u2019s assessment.<\/p>\n
Many policies won\u2019t start paying until after you\u2019ve paid out of your own pocket for a set period, such as 20 days or 100 days. This is known as the \u201celimination period.\u201d<\/p>\n
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