Do I Need Long-Term Care Insurance?

With nursing home care running north of $68,000 per year, many families who have a "comfortable retirement" could find themselves facing the prospect of spending down a large chunk of their savings and investments should the need for nursing home care arise. Without long-term care insurance some will find their only option may be to apply for Medicaid assistance.
 
While Medicaid rules vary from state-to-state, typically a person needing long-term care benefits must spend down their assets to $5,000. If there is a surviving spouse, they can usually keep the family home (but states can consider home equity in excess of $500,000), a prepaid burial plan, and between $50,000 and $100,000 in resources.
 
 
Cost
For couples aged 60, the average cost of long-term care insurance runs about $3,500 per year. For many this is expensive; some alternatives you might consider are long-term care annuities and life insurance policies with long-term care riders.
 
Regardless of cost, you should shop for a policy from a company with the financial stability to pay a claim if it becomes needed. Limiting your coverage and extending the waiting period can help reduce costs as well.
 
You should choose a policy that meets your needs and include in-home care and policy triggers that are reasonable. A report from the American Association for Long-Term Care Insurance suggests that for the majority of policy owners, three years of coverage is sufficient. With high cost of coverage, the primary reason for not having coverage this study suggests that some coverage is better than none, and for most, is all that is needed.
 


What Triggers Your Long-Term Care Benefits?
Most companies will pay benefits if you are unable to complete two of the six activities of daily living, which include:
 

• Eating
• Bathing
• Dressing
• Toileting
• Transferring from a bed or chair
• Maintaining continence

 
Or if you have severe cognitive impairment.
 
When Do Benefits Begin
Often long-term care policies have an exclusion period before benefits will begin. There can be some flexibility here if you have the resources to pay for some expenses yourself, for a few months. The most common exclusion period is 90 days. That means you would pay the first 90 days of expenses out of your pocket. This is reasonable and ties in with Medicare, who will generally cover the first 90 days of care if you are in a nursing home for something you are expected to recover from, such as surgery or a stroke.
 
What Long-Term Care Insurance Covers
Virtually all policies are comprehensive plans, which cover care provided in many settings: at home, adult daycare centers, assisted living facilities, nursing homes, and Alzheimer’s facilities.  A home care benefit will typically cover skilled nursing care and occupational, speech, physical, and rehabilitation therapy.  Most importantly, it can help with personal care, such as bathing and dressing.  
 
Where to find Long-Term Care Facilities
You may at some time in your life be involved in selecting a nursing home facility for a loved one. The US Department of Health and Human Services Medicare site now has a feature called Nursing Home Care Compare. You can use this site to find and compare nursing homes by state, zip code, county or name.
 
Once you have found nursing homes in your area you can view information on the quality of care provided. Each home is compared to the state and national averages for each category; for example, the number of nursing staff per-resident, per-day; or the percentage of residents who are physically restrained. Although the grading is measured against negatives and a little confusing (it seems a lower score is better), it is an excellent resource and a good place to start should you ever need nursing home facilities.