Tips For Buying Long Term Health Care Insurance

As the U.S. senior population grows, many people are asking whether they should buy long-term care insurance--to pay nursing or home health care costs--either for themselves or for their aging parents. The answer is: Perhaps. Think of long-term care insurance as insurance in the truest sense of the word--because the likelihood that you'll use it is slim. Forty-three percent of people sixty-five and older spend some time in a nursing home, but more than half of them spend less than a year, and only 9 percent spend more than five years. The waiting period before your policy kicks in can vary, typically from thirty days up to a year.

Realistically, long-term care policies make the most sense for people with a net worth of $200,000 to 1 million. Those with less will exhaust their assets and qualify for Medicaid; those with more can probably invest their assets and fund their own care.

More than 120 insurers offer long-term care policies, with average premiums from several hundred to several thousand dollars a year. And you ought to be dealing with only the most reputable. As with every other type of insurance we've talked about in this chapter, you need to get at least three quotes.

Here are the other rules of the road:

• Buy Young. Though the motivation is rarely there when you're young, you can purchase long-term care insurance at any time. And if you are young, your premiums--and chance of rejection--will be much lower. Start shopping around age sixty.
• Shop for a policy with a three-year term. Why? Most people who turn out to need long-term care need it for two and a half years. And, although it's controversial, going this route gives you the option--which some choose--to transfer your assets in order to qualify for medicaid.
• Buy flexible coverage. Get a policy that covers not only a stay in a nursing home, but home health care, particularly if you think you'd like to stay at home (and who wouldn't) for as long as possible.
• Keep an eye on costs. Look for a daily benefit at least as large as the average daily nursing home cost in the states that you may want to reside in a nursing home (it does not necessarily have to be the state you currently live in; perhaps it will be where a friend or relative lives).
• Inspect policy triggers. The best policies kick in as soon as a physician says that care is necessary, but in other cases policyholders need to be unable to perform certain task like feeding themselves, dressing themselves, bathing, and so on, before a policy will pay out. You want as much wiggle room as possible here. A seasoned agent who knows the language is an invaluable resource.
• Buffer your costs with a waiting period. To keep cost down, make sure you get an elimination period (the amount of time before payment kicks in) of ninety days. Most people can afford to pay for their own care for three months. And the price difference between a policy that kicks in on Day 90 and one that kicks in on Day 1 can be 30 percent.

An excerpt from the book Talking Money by Jean Chatzky

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