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It’s a frightening prospect. You fall and break a hip and need several months of nursing home care. Or you’re recovering from a stroke and need help bathing and getting dressed each morning. Or your husband is slipping into dementia and requires assistance with daily activities.
Those scenarios are the type of care covered under long-term care insurance, known as LTC insurance.
As of 2012, an estimated 8.1 million Americans have bought such policies, which can cover anywhere from $160 to $250 a day for care at home, in assisted living or a nursing home. Although fewer people today spend lengthy time in a nursing home, the costs are daunting: a one-year stay in a California nursing home in 2014 cost an average of $94,400, according to the California Partnership for Long-Term Care.
But the policies can be pricey, and they’re not for everyone. Here are some questions to consider if you’re contemplating whether to buy an LTC policy.
QUESTION: What’s new with LTC coverage?
ANSWER: A lot has changed, said Bonnie Burns, a long-term care insurance expert with California Health Advocates, a nonprofit that promotes education and counseling for Medicare and LTC coverage. Today, more people receive long-term care at home, from family, friends or paid caretakers, than move into assisted living. “That’s a big change from 20 to 25 years ago,” when most people went to nursing homes, she said. “Many of those older (LTC) policies don’t pay for the kinds of things people use today, like home care or even assisted living.” Some older policies also had specific requirements before they’d make claims payments, such as requiring that in-home care be provided by skilled nurses.
Today, LTC policies offer lots of choices, including how many years you want to collect benefits, how much per day, where you want to receive care and if you want inflation protection. Also, as people are living longer and dealing with dementia and other aging issues, a number of companies have dropped out of the LTC market altogether because it was no longer as profitable. Large group plans have struggled recently with higher-than-expected claims and rate increases of as much as 85 percent. Many companies have had to initiate rate increases of 40 percent or more to cover unexpected expenses due to a high number of claims.
In other states, some insurers are charging higher premiums for women because they live longer and require more years of long-term care. In California, there’s a bill that would ban insurance companies from charging higher premiums based on gender.
Q: Who needs an LTC policy?
A: There’s no easy answer, Burns said. Somebody who has $30,000 in income can’t afford the same premiums as someone with $250,000 in income. “If you’re a renter with $20,000 in savings, long-term care coverage is not for you,” she said; Medicaid will likely cover your expenses.
Some choose to self-insure, feeling confident they can pay out-of-pocket should the need arise. Others prefer to buy a policy so they don’t drain money from funds or assets they want to pass on to their children.
“There’s no rule of thumb. There are no guidelines,” said Burns. “Everyone’s financial situation is different. These products should be tailored to the individual’s economic circumstances, similar to life insurance.”
Q: What’s the best age to buy an LTC policy?
A: “It’s an expensive product,” said Margaret Reilly, program manager for the Health Insurance Counseling & Advocacy Program (HICAP) office in West Sacramento, which covers nine Northern California counties. The average annual premium for a U.S. long-term care policy is about $2,283.