Long-Term-Care Insurance a Difficult Decision


The long-term-care insurance industry is shrinking, premiums are soaring and there is no fix in sight. At the same time, government safety-net programs, already under cost-cutting pressure, are bracing for demand from more of the 77 million aging baby boomers. Given that current state, when does it make sense to consider long-term-care insurance?

Long-term-care insurance typically provides custodial care needed when an elderly or disabled person becomes so frail that he or she needs help with two “activities of daily living,” such as bathing or eating. Newer policies generally cover dementia care as well.

Besides your age and health, there are three moving parts that have the biggest impact on your premium: The daily benefit amount, the length of coverage and your level of inflation protection.

Costs are rising, and they vary widely. Among 12 insurers, the most expensive policy cost 87% more than the comparable cheapest policy. Add to this potential premium increase of 30-50%, which are now common.

Costs of care are climbing as well. Two reasons for the large premium increases are the industry underestimated how fast medical costs would rise as well as how many seniors would actually use the benefits.

For more detailed information on Long-Term-Care Insurance, please visit our Education Center.

The choice to purchase long-term-care insurance often comes down to a matter of who will take care of you should you ever need the custodial care services covered by the insurance. Not everyone can rely upon family to fill the role, or would choose to ask for that type of commitment.

But home care can cost much less than more-intensive institutional care, as long as you don’t need round-the-clock assistance. For more on home care, see “Are You Overpaying for Your Parents’ Care”, Wall Street Journal, July 19, 2013.

Currently, Medicare pays for only short stays in nursing homes or in-home care under limited conditions. For the most part, seniors who need care have to burn through their savings to pay for it. Only after they are impoverished will Medicaid—the government health program for poor people —pay for a basic level of care.

Medicare’s consumer handbook, “Medicare & You,” spells out what it does and doesn’t cover (at www.medicare.gov).

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