Who Should Buy Long Term Care Insurance?

As you grow older, you may gradually notice that you need help with the regular activities of daily living, such as bathing and dressing or just getting out of bed. Or one day, without warning, you may suffer a debilitating stroke or heart attack that leaves you dependent on others to help get you through each day.

No one can predict how long you may need help. You may need nursing home or home health care, or some other kind of specialized care, for only a short period of time. Or, you may need these services for many months, for years, or even for the rest of your life. It is impossible to know if and when you will need long term care, but here are some statistics from a few years ago that suggest there is a good chance you will need it:

  • As of 2000, average life expectancy after age 65 (male and female combined) had increased to 17.9 years, five years longer than in 1940 ("The Older Population, A Profile of Older Americans: 2001," Administration on Aging. Information on this profile based on data gathered in the 2000 U.S. Census, cited at www.ltcfeds.com/documents/fil es/NAIC_Shoppers_Guide.pdf).
  • As of 1997, about 12.8 million Americans of all ages required some form of long term care, and about 2.4 million lived in nursing homes (National Academy on Aging, 1997, cited at www.ltcfeds.com/documents/fil es/NAIC_Shoppers_Guide.pdf).
  • As of 2002, about 44% of people reaching age 65 were expected to enter a nursing home at least once in their lifetime (Stillman and Lubitz, "Medical Care", 2002, cited at www.ltcfeds.com/documents/fil es/NAIC_Shoppers_Guide.pdf)
  • As of 2002, of those who do enter nursing homes about 53% will stay for one year or more (Stillman and Lubitz, "Medical Care", 2002, cited at www.ltcfeds.com/documents/files/NAIC_Shoppers _Guide.pdf) ). Statistically this means that if both you and your spouse live to be 65, one of you will spend some time in a nursing home.

With life expectancy continuing to increase, these numbers reflect a continued increase in need for long term care now and in the future.

Whether you should consider a long term care insurance policy depends on your age, health status, overall retirement goals, income and assets. For example, if your only source of income is Social Security, you probably shouldn't buy long term care insurance since you may not be able to pay the premiums. A person who is 65 years old and in good health can expect to pay between $2,000 and $3,000 per year for a policy that covers nursing home and home care, with premiums that increase inflation and may also periodically be increased by the insurance company based on claims experience.

But long term care is expensive—as much as $100,000 per year depending on the type of care needed and desired and on the region of the country in which you live—so if you don't want to use up your assets paying for long term care), you may want to consider long term care insurance. Some people refer to long term care insurance as "asset protection insurance." Other motivations for purchasing long term care insurance include a desire to stay independent of government aid and to avoid burdening your family with providing your care and/or the costs of your care.

If you do have some discretionary income and assets and wish to look into the purchase of long term care insurance, be sure you think long term, not only with regard to care but also with regard to the premium. You want to be sure you have sufficient funds to continue paying your premium for the remaining years of your life. You don't want to pay for a number of years only to have the policy lapse when you actually need the coverage.

Your health is a key factor in whether you should or will even be able to buy long term care insurance. If you already have health problems that indicate you may need long term care--good examples are Alzheimer's disease, Parkinson's disease, diabetes, history of heart disease or strokes--you probably won't be able to buy long term care insurance or, if you can, the premium may be prohibitively high.

Some states have regulations that require an insurance company or agent to work with you to fill out a worksheet to help you decide if long term care insurance is right for you. The worksheet shows what your premium likely will be for the coverage you want, and asks questions about the source and amount of your income and the amount of your savings and investments. If an insurance agent does not help you, you should do this on your own so you make the right decision.

Not everyone should buy a long term car insurance policy. For some, a long term care policy is affordable and worth the cost. For others, either the cost is too great or the policy you can afford does not offer enough benefits to make it worthwhile. You should not buy long term care insurance if you can only afford it by not paying important bills – either now or in the future.

YOU SHOULD NOT BUY LONG TERM CARE INSURANCE IF:

  • You can't afford the premiums
  • You have limited assets
  • Your only source of income is your Social Security benefits
  • You often have trouble paying for utilities, food, medicine or other important needs
  • You are on Medicaid

YOU SHOULD CONSIDER BUYING LONG TERM CARE INSURANCE IF:

  • You have significant assets and income
  • You want to protect some of your assets and income
  • You can pay premiums, including possible premium increases, without financial difficulty
  • You want to stay independent of the support of others
  • You want to have the flexibility of choosing care in the setting you prefer or in which you will be most comfortable