What You Should Know About Long-Term Care Insurance
Here are some facts to consider when deciding how you'll finance assisted living and nursing care in your old age.
Long-term care expense is a common concern these days. But did you know that most older people don’t live in long-term care facilities? They live in retirement communities or in their own homes, because they’re able to care for themselves.
Statistics from the American Society of Consultant Pharmacists show:
- Five percent of the older adults in the United States reside in nursing facilities (1.8 million of the 36 million over the age of 65).
- Three percent reside in assisted living communities.
- Ninety percent of adults over 65 live at home, in retirement communities, or with their families.
In 2003, the average cost for a room in a private nursing home was about $66,000 a year. By 2021, the average annual rate could rise to $175,000.
The cost of long-term care insurance must be weighed against your ability to pay the premiums and the probability that you’ll need such insurance. The statistics don’t mean you should avoid long-term care insurance — or any other insurance — but as with all Christian decisions, God should be the object of your trust.
In reviewing 47 long-term care insurance policies, Consumer Reports concluded that long-term care insurance is too risky and too expensive for most people. If premiums rise, you may have to drop the coverage and lose everything you’ve paid.
Some policies are packed with fine print that can keep you from collecting. And long-term care insurers with weak balance sheets may not be around when you need them to pay.
Annual premiums are age related and the same plan costs $1,625 annually for someone age 50, $3,100 for someone age 60, and $7,575 for someone age 70.
You get lower premiums if you buy when you're younger, say 45. But the average age of people entering nursing homes is 83, so you could pay for nearly 40 years before knowing whether you’ll need to use the policy.
Lifetime coverage is available, but most people can’t afford the premiums, so they purchase a specified benefit period, usually one to six years, and hope they won’t need more coverage.
Policies with deductibles typically have you pay for the first 20 to 100 days of nursing home care out of your own pocket, and the larger the deductible (elimination period), the lower the premium. A policy with a 90-day period might cost 15 percent less a year than one with a 30-day period. But with inflation, a nursing home that costs $181 a day now will cost $538 in 20 years, bringing the total for those 60 additional days to $32,000. So it would seem wise to choose a 30-day elimination period.
Some Criteria to Consider
If you decide you want a policy — and can afford it — the following guidelines, based on the Consumer Reports’ criteria, may be helpful:
- If you have a chronic condition such as diabetes that could prove incapacitating over time, consider buying long-term care insurance at age 55-60.
- Between ages 60 and 64, begin to assess whether you need longterm care coverage.
- If you decide to buy, consider buying at around age 65. But be aware that new care systems may emerge that might not be covered by a policy purchased today. For example, 15 years ago, long-term care insurance didn’t cover assisted-living care.
- If you try to buy later than age 70, a policy might be too expensive or you may not pass the qualifying medical tests.
- Buy from a strong insurer. Since you’re buying a policy for use 20 to 30 years in the future, seek a company with high marks from insurance ratings companies — preferably B+ or higher.
- Check online ratings from A.M. Best*, Moody’s *, Standard & Poor’s*, or Weiss*. The first three services are free, but Weiss charges for online and telephone ratings. Buy only from insurers rated in the top two financial strength categories by at least two of the ratings services.
- Choose a policy requiring that a person be unable to perform no more than two activities of daily living. One should be bathing. According to the U.S. Department of Health and Human Services 1999 National Nursing Home Survey, 94 percent of nursing home residents receive help with bathing.
- Good policies cover care in both nursing homes and qualified assisted-living facilities. Generally, “qualified” means a staff person is on the premises 24/7, a doctor is on call and the staff is able to supervise medications. Homecare benefits should include adult day care, hospice services and temporary overnight respite care.
- Call nursing homes in the area where you think you’ll be living and make sure your benefit amounts will cover their charges. Because you probably won’t need your policy for decades, it’s imperative that daily benefits increase along with the price of care.
Some policies have an option paying you 5 percent a year compounded, enough to keep pace with the anticipated 5.6 percent annual increase in nursing home charges. However, adding this option could quadruple your premium.
The average length of stay for nursing home residents is 2 ½ years, and 90 percent of those over age 65 stay less than five years. A four-year benefit may be reasonable, and even if you require nursing home care for a longer period, four years could give you and your family time to prepare for the financial demands of a longer stay.
Solomon wrote, “Trust in the Lord with all your heart and do not lean on your own understanding. In all your ways acknowledge Him, and He will make your paths straight” (Proverbs 3:5-6, NIV). If you simply can’t afford long-term care insurance, then you have to trust that God will take care of your needs another way.
*(Note: Referrals to Web sites not produced by Focus on the Family are for informational purposes only and do not necessarily constitute an endorsement of the sites' content.)