Long-term-care insurance isn't for everyone. Financial planners rarely recommend it for people under age 60, and then only for those who have sufficient assets to protect but not enough wealth to pay nursing-home bills on their own.
Once you decide to shop for long-term-care insurance, you'll find all shapes and sizes of policies. To decide which is right for you, ask these questions:- When does the policy kick in? Medicare offers limited coverage of up to 27 days of nursing-home care after three consecutive days in the hospital. If you will be able to pay some costs after your Medicare benefits are exhausted, consider a 90- or 100-day waiting period rather than a 30-day wait. You'll save about 10 percent in premiums.
- How much of the cost do you want covered? Your policy should cover 80 percent to 100 percent of the daily cost of long-term care. Look for a daily benefit that can be applied freely to either nursing-home, home health or assisted-living care. Nursing homes - the most expensive option - currently cost from $80 to $200 a day, depending on your region.
- How long will you need coverage? This is called the benefit period. You can buy a lifetime policy if you think you might end up in a nursing home for more than five years, but most nursing-home admissions are for less than three months. Buying a policy with a three-year benefit period is less expensive and is probably adequate.
- Will the policy keep up with rising costs? Consider a policy with an inflation-protection rider that increases the daily benefit amount.
- When should benefits begin? In determining when to begin benefits, insurance companies look at your ability to perform typical activities of daily living, or ADLs. Policies pay benefits when you are unable to perform at least two such ADLs. Inability to walk or bathe is most likely to occur first.
- Will your policy lapse if you can't pay the premiums? You can choose nonforfeiture protection that provides some coverage even if you can't afford to pay the premiums. But the duration of your coverage will be reduced in such cases, depending on how much you paid into the plan. Keep in mind that nonforfeiture protection can boost the cost of your overall premium by as much as 30 percent to 50 percent.