How to Buy Long Term Care Insurance and Why You Should


We’re living longer. During the 20th century, life expectancy for the average man and woman in the industrialized world rose from 50 years to nearly 80. Here in the U.S., the average citizen can expect to reach 78.11 years. Regrettably, those extra years won’t necessarily be quality ones. About 43% of 65-year-olds alive today can plan on spending at least some time in a nursing home, and the odds increase after age 75. Even more regrettable: most of us don’t have a plan or a clue on how we would pay for long-term health care.  Call it wishful thinking or denial, but as of 2008, only 8 million Americans had long-term care insurance. This despite the fact that the average cost to stay in a big city long-term care facility can run around $200 a day and in-home services will set you back more than $20 an hour!


According to a Life and Health Insurance Foundation for Education study done in 2009, 23% of the folks questioned said they were counting on family and friends to care for them in their infirmed old age. Another 23% were relying on Medicare and Medicaid and 20% felt their health insurance policies would foot the bill. They’re probably all wrong on all counts. Most health insurance policies (the kind your employer currently provides or you purchase independently) do not cover long-term care. Medicare covers up to 100 days IF you’ve been in a hospital for 3 consecutive days before needing  long-term care, and then it’s only paid in full without a co-pay for 20 days. Medicaid will only kick in for long-term care if you have zero assets. And friends and family? Good luck with that (and remember to send Cousin Jo a nice gift this Christmas.) 


Ready to shop for long-term care insurance? Here’s what you need to know:

  • Most long-term care policies are written to pay a set dollar amount per day for covered benefits during the time period specified.
  • The older you are when you buy long-term care insurance, the higher your premium will be. 
  • The longer your benefit period, the more  you’ll pay in premiums. Most experts advise buying a long-term policy with a minimum of 3 to 5 years’ coverage. 
  • The majority of long-term policies pay you for actual fees charged by the provider up to the policy limits. There are other types that pay daily benefit amounts, giving you a bit more flexibility to choose what type of care you want (e.g. in-home vs in-facility). 
  • Most long-term policies cover skilled care, intermediate care and custodial care.  Home care may be covered, or offered as an add-on. Some providers offer policies for adult day care, assisted living and hospices. 
  • Benefits typically kick-in when you can’t perform a variety of daily-living activities on your own or when your cognitive ability has been seriously impaired (e.g. Alzheimer’s or a stroke). 
  • When reviewing long-term care policies, pay attention to the elimination period (the wait time before benefits start – usually zero to 90 days); renewability provisions and how they are tied to rate increases; and whether or not there is a provision to increase benefits to adjust for rising costs. 
  • Shop around for your long-term insurance coverage and compare policies carefully before you buy. Then do a little research to make sure the provider is financially sound with adequate assets in reserve. You can do that online at A.M. Best or Standard & Poor’s. 
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