Financial Resource Center

Retirement Planning

Long-term Care Insurance Critical For Middle Americans

by Center for Personal Finance editors / November 4th, 2013

NEW YORK (11/5/13)--The great wave of baby boomers is approaching the age when many will need several years of health care, either in facilities, the homes of loved ones, or in their own homes. While the affluent can self-insure and the very poor can get help via Medicaid, most uninsured middle-income Americans won't be able to pay for their long-term health care (Forbes Oct. 25).
The costs this group is facing, according to Genworth's 2013 Cost of Care Survey, are sobering: The median cost for a private room in a nursing home now is $84,000 a year, projected to be $265,000 by 2030.
Don't look to Medicare or private health insurance to pay for long-term care (LTC). Insurance to help pay for LTC is expensive, averaging $2,268 to $4,000 a year, and that's if you're even accepted. Few Americans older than 50 own LTC policies.
If you need LTC and are uninsured, you have a few options: Go completely broke so you qualify for Medicaid, pay from your savings, or turn to a family member for help. The first is unpalatable, the second unlikely, and the third could jeopardize your family member's financial stability.
Here are some guidelines to help you make a decision about LTC coverage:
  • Don't wait. Start shopping now. In 2013, the average monthly premium for a 50-year old is $81. At age 60 you can expect to pay $125. At age 65 it's $361. Waiting costs more and increases the risk of not being able to qualify.
  • Take a good, better, best approach to LTC planning. It doesn't have to be all or nothing; some insurance coverage is better than none. Consider selecting good coverage instead of the best and buy only as much as you know you will be able to continue to make payments on. Choose a higher deductible to achieve more savings. Think of your LTC benefit as a supplement to Social Security benefits, retirement income, and savings.
  • Comparison shop. Deciding which company to work with is probably the most important initial decision you'll make. The price for virtually identical coverage can vary as much as 90%.
  • Consider different ways to deal with rising costs. Policies that increase benefits as the cost or care rises each year, equal to about a 5% annual inflation adjustment, will cost more than ones that increase benefits based on the Consumer Price Index or at a fixed rate, for example 3%.
  • Check the elimination period. This is the time before your policy kicks in; 30 days is typical. If you choose 90 days or longer it will cost less, but make sure you can pay for your care for that length of time.
There are many variables to look out for: If you move outside the U.S., will your plan still cover you? Is in-home care included? Are your existing health conditions covered? How will you be reimbursed--by lump sum or for specific expenses?

To get a handle on the details, visit the websites for the American Association for Long Term Care Insurance ( or the U.S. Department of Health and Human Services ( And for related information, read "Check the Financial Health of Your Insurance Company" in the Home & Family Finance Resource Center.
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