If you’re asking yourself how to choose long-term care insurance, you’re definitely not the only one. The reality of aging and the possibility that you might need some level of long-term care down the road is something that hits most of us sooner or later. The trick is knowing what to look for, what options are out there, and how to get the best deal without being overwhelmed by all the insurance jargon.
Let’s keep it real—long-term care insurance isn’t the most exciting thing to think about. But it’s one of those things you’ll be glad you figured out sooner rather than later.
So, let’s break it down and talk about everything you need to know, from the basics to the nitty-gritty details. I’ll share insights on how to navigate the process without going crazy.
What Is Long-Term Care Insurance
Before diving into the specifics of choosing long-term care insurance, let’s get clear on what we’re dealing with.
Long-term care insurance helps you pay for services you might need if you have a chronic illness, disability, or simply get too old to handle basic daily tasks on your own. This might include things like:
- Personal care services (help with bathing, dressing, eating, etc.)
- Home health care (nursing or therapy at home)
- Assisted living or nursing home care
- Memory care for Alzheimer’s and other related conditions
Now, you might think: “I’ll cross that bridge when I get there,” and I get it. But here’s the thing—you don’t want to wait too long.
The younger you are when you start planning, the cheaper the premiums. Plus, it gives you more flexibility in terms of options. Waiting until you’re older? Well, that means higher premiums and fewer choices. No bueno.
Why Long-Term Care Insurance Matters
We all know how expensive medical care is in the U.S., and long-term care costs are no exception. The price tag for care can be staggering.
According to the Genworth 2023 Cost of Care Survey, a private room in a nursing home could cost anywhere from $9,000 to $12,000 a month! And that doesn’t even include the costs of home care or assisted living, which are equally expensive.
So, you’ve got a few options if you don’t want to end up eating through your savings. You can self-fund (which requires having a nice chunk of change saved up), rely on Medicaid (if you qualify), or get long-term care insurance.
Most people don’t plan for the massive financial burden that can come with needing care. If you have long-term care insurance, it gives you the financial support you need to get care without going broke. Sounds good, right?
How to Choose the Right Long-Term Care Insurance Plan
1. Your Personal Needs
The first and most important step in figuring out what long-term care insurance plan is right for you is to understand your needs.
And I’m not talking about just today’s needs. You need to think ahead, because this stuff can get complicated the further down the road you go.
What do you really need in a policy? This is where you take a step back and think about:
- Family history: Is Alzheimer’s or dementia common in your family? Are there chronic conditions you’re worried about? If your family tends to have health problems as they age, you’ll want a policy that covers more specialized care.
- Health status: Are you generally healthy, or do you already have health concerns? The earlier you start thinking about long-term care, the better. If you’re healthy, you might only need a basic policy. But if you’ve got health issues now, you’ll probably need something more robust.
- Living situation: Do you plan on staying in your home for as long as possible, or do you think you’d prefer to move into an assisted living facility if the time comes? Some policies offer coverage for home care, while others may be more focused on institutional care.
These are the key questions to ask yourself. The more you know about your future needs, the easier it’ll be to choose the right coverage.
2. Choose the Right Amount of Coverage
So now that you’ve gotten a grip on what you might need, let’s talk about how much coverage you actually need.
If you go with too little, it’s not going to do much when the time comes. But if you get too much, you’re wasting money on unnecessary benefits. It’s all about balance.
Here’s what you need to think about:
- Daily Benefit Amount (DBA): This is the maximum amount the policy will pay for your care per day. The more coverage you have, the more it’ll pay out—but it also means higher premiums. The average daily benefit for long-term care in 2023 was around $170, but this varies depending on where you live and your needs.
- Benefit Period: This is how long the insurance will pay out. Some policies will pay for a few years, while others will cover you for your lifetime. A longer benefit period gives you more security, but it also comes with a higher price tag.
- Elimination Period: Think of this like your deductible. It’s the waiting period before the insurance kicks in. Some plans may have a 30-day elimination period, while others might go as high as 90 or 180 days. The longer you’re willing to wait, the lower your premiums might be. But keep in mind: if you have to wait six months for your benefits to start, that’s a long time to be paying for care out of pocket.
3. Inflation Protection is Key
Inflation protection might sound like some boring financial jargon, but trust me—it’s essential. As prices rise, so do the costs of long-term care.
If your plan doesn’t include inflation protection, the daily benefit you have today may not be worth much in 10, 20, or 30 years.
Inflation protection ensures that your daily benefit will increase over time, keeping up with the rising costs of care. It’s one of those features you don’t realize you need until it’s too late.
Without inflation protection, you might find yourself in a situation where your long-term care insurance policy only covers a fraction of what it needs to.
4. Check Out the Insurer’s Reputation
Let’s face it: not all insurance companies are created equal. The company you choose matters. You don’t want to pick a policy from a company that’s going to flake when you need them the most. Look at things like:
- Financial ratings: Ratings from agencies like A.M. Best and Moody’s can give you an idea of how financially stable an insurer is.
- Claims history: Does the insurer have a reputation for denying claims or making the process difficult? This could be a red flag.
- Customer service: Make sure they have a good customer service track record. It’s one thing to sell you a policy, but it’s another to be there for you when you need help.
5. Premiums: Don’t Go Overboard, But Don’t Skimp Either
Premiums are the biggest sticking point for a lot of people. If you’ve ever shopped for insurance, you know that premiums can vary wildly.
You don’t want to sacrifice too much coverage just to keep premiums low. That’s a classic mistake people make, thinking that they’re saving money, but they end up with a policy that doesn’t really protect them when it counts.
When looking at premiums, ask yourself:
- Can you afford the premiums now and in the future? Keep in mind that premiums may increase over time, especially if you buy a policy early in life. You don’t want to get stuck with a premium that’s too high to keep paying.
- Are the benefits worth the price? Don’t just look at the premium. Make sure that the benefits are in line with your needs. A cheaper policy might not give you enough coverage when it matters.
6. Know What’s Not Covered
While it’s important to know what’s covered, it’s also critical to understand what’s not covered. The fine print in long-term care insurance can be tricky, and sometimes, things are excluded that you didn’t expect.
Some things to watch for:
- Pre-existing conditions: Many policies won’t cover conditions that you already have when you purchase the policy. If you’ve got health issues now, it might be harder to get a policy that covers them.
- Certain treatments: Some policies might exclude specific types of care, like cosmetic treatments or care related to substance abuse.
- Types of care: Not all policies cover home care, and some may only pay for care in an institutional setting. Be sure to read the terms carefully.
7. Long-Term Care Riders: Are They Worth It?
Long-term care riders are add-ons you can add to a life insurance policy. They allow you to tap into your life insurance if you need long-term care. It can be a decent option, but there are a few things to keep in mind:
- Higher premiums: Riders generally come with higher premiums.
- Dual purpose: While they’re an interesting way to combine benefits, life insurance with a long-term care rider may not be as comprehensive as a stand-alone long-term care policy.
8. Government Programs: Medicaid vs. Long-Term Care Insurance
A lot of people wonder whether they really need long-term care insurance or whether Medicaid might be a viable option. Medicaid can cover long-term care, but there are a few catches:
- Eligibility requirements: You have to meet strict financial eligibility requirements. That means you have to have limited assets and income to qualify.
- Limited coverage: Medicaid covers long-term care, but the benefits may be less than what you would get with a private insurance policy.
Medicaid isn’t always a perfect safety net, but if you qualify, it can definitely help. Just don’t rely on it without thinking through all your options.
9. Self-Funding: Is It An Option?
Self-funding long-term care is another route, especially for people who are wealthy enough to cover the costs on their own. If you’ve got a decent chunk of savings, you could pay for long-term care as you go.
The problem with self-funding is that it’s risky. You never know when you’ll need long-term care, and you don’t want to run out of money just when you need it the most.
10. When Should You Buy Long-Term Care Insurance?
Ideally, you should start looking into long-term care insurance in your 40s or early 50s. If you wait until your 60s or 70s, you’ll be paying significantly more, and you might have fewer options.
Wrapping It Up
Choosing long-term care insurance can feel overwhelming, but once you break it down and understand your needs, it’s much easier to navigate. So, how to choose long-term care insurance? Start early, know your needs, and don’t skimp on the important stuff like inflation protection and a reputable insurer. Trust me—it’s one of those decisions you’ll be grateful you made down the line.
If you’re ready to start planning for the future, it’s time to dig in and make the call. Don’t wait until you’re older and paying higher premiums—get ahead of the game now, and you’ll be set for the long haul.
