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. The policies can be pricey, and they're not for everyone. Here are some questions to consider.
What's new with LTC coverage?
A lot has changed, said Bonnie Burns, an expert on the matter. Today, more people receive long-term care at home, from family or friends, 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."
Today, LTC policies offer many choices, such as 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, large group plans have imposed rate increases of as much as 85 percent.
Who needs an LTC policy?
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.
What's the best age to buy an LTC policy?
"It's an expensive product," said Margaret Reilly, program manager for the Health Insurance Counseling & Advocacy Program. The average annual premium for a U.S. long-term care policy is about $2,283.
Generally, it doesn't make too much sense to buy a policy before your mid 50s, Reilly said. "It's just years of additional premiums and most of us would not need long-term care in those younger years." But, she said, consider your family's medical history, as well as your own health issues, and obtain a policy before you get a diagnosis that could eliminate you from consideration. "The older you get, the harder and more expensive it is to buy a policy."
How cost-conscious should people be when buying these policies?
"These policies are expensive," Burns said. "There's no easy way to make an apples-to-apples comparison, so people tend to buy based on price. But if you buy a lower-priced policy, you might very well buy something that's going to have a rate increase."
How should families be involved?
"When you need the care, you won't be the person dealing with the insurance company," Burns said. She recommends that consumers sign up for a "third-party notice," so that if the premium lapses, you've named someone to be notified.
What's the best advice for someone contemplating buying an LTC policy?
Do a lot of research. Get second and third opinions about what a policy will cover should you need care. "Nobody needs 100 percent coverage for their long-term care costs," Burns said. It should be a combination of what you can afford to pay in premiums and what you might need in coverage.