by Gary Foreman

Should you consider buying long term care insurance? When should you buy? And how much? We explore the long term care costs those over age 65 face and what to look for in a long term care insurance policy if you decide it is a wise purchase for you.

So, if you decide that you want to consider long-term care insurance, what should you look for? And how old should you be before you begin coverage? Let’s see if we can’t shed some light on the subject.

Find a Good Insurance Agent

We’ll begin by finding a good insurance agent.

Select your agent carefully. For most buyers, this is an area where they have very little knowledge. That means you’ll be relying on your agent for advice on which policy and coverage level to buy.

You’ll also want an agent who can work directly with the home office to help present your medical history in the best possible light. That can be important since many companies will exclude pre-existing conditions like Alzheimer’s or heart disease. If your medical history is bad, they could turn you down altogether.

Compare Long Term Care Insurance Policies and Ask Questions

After you’ve found a good agent, it’s time to compare policies. Remember that policy benefits don’t actually “pay for” medical or nursing home bills. The policy will pay a predetermined amount if you meet certain conditions or incur certain expenses (like being in a hospital or nursing home). But your benefit can be less than or more than the actual cost of the service covered. The amount of the bill does not determine the amount of the check you’ll receive.

When comparing policies, you’ll want to ask a number of questions.

First, find out whether it covers care provided in the hospital, in a nursing home or in your own home. Don’t assume that it will cover all three.

How long will you wait before the policy begins to pay? That’s called ‘the elimination period’.

What exclusions are in the policy? Does it exclude certain causes (diseases) that are part of your personal or family history? How long will skilled or intermediate care be covered? Will the policy pay as long as you live? Or is there a maximum benefit?

Will the benefits be adjusted for inflation? What about premiums? Can they be increased? And, if so, how often and by how much?

It is important to read the policy and ask questions of a qualified agent on portions that you don’t understand. Don’t expect to understand every paragraph in the policy. Even if you work in the medical or insurance industries, you’ll have some questions. Even the agent may not be able to answer every question.

You also need to remember that there are no refunds if you don’t use the policy. And no, you can’t buy a policy for your parents. You can help pay for the policy, but the covered person needs to apply.

Related: 10 Questions To Ask About Long Term Care Insurance Before Buying

What To Know About Long Term Care Insurance Premiums

Once you’ve compared what the policies cover, it’s time to take a look at premiums. They vary widely. On the low end is a person who’s young (age 40) and looking for a minimal level of benefits. The rates will increase as you get older, get sicker or want more coverage. According to the 2022 National Long-Term Care Insurance Price Index (the latest numbers available), for an initial benefit of $165,000, a single male aged 55 will pay an annual premium of $950, a single woman $1,500 and a couple $2,080 combined. At age 65, the same cover increases to $1,700, $2,700, and $3,750, respectively.

Next, check the actual costs of nursing homes in your area. That will give you an idea of how high your bills would be. Pay them a short visit to decide if you’d be willing to live there. You’re trying to find out what it would cost for a level of care that’s acceptable to you.

Then, think about how much coverage you want. You don’t need to insure for the entire amount. For instance, if you expect the annual cost of care to be $40,000 and you have an annual income of $25,000, you might want to buy a plan that would pay the difference of $15,000 a year. That would be about $45 per day.

Also, remember that it doesn’t take much inflation to increase costs significantly. A 5% inflation rate will double the cost of an item in 14 years. If you’re 65 today, it’s possible that you could live 28 more years. And in that time, a $100-a-day room would increase to $400 per day!

One way to reduce insurance costs is through careful selection of deductibles and elimination periods. You can choose how long you want to be in a hospital or nursing home before the benefits begin. If your goal is to protect your assets, a one-year elimination period could make sense. That will reduce your premium.

Related: 9 Ways To Save on Long Term Care Insurance

Rank the Companies and Pick the Top of Your List

Once you’ve collected quotes from the different sources, it’s time to rank the companies. If you decide to apply for insurance, you’ll want to start with the top of your list. Then, if your first choice turns you down, you can apply to the next until you find coverage.

Should you buy long term care insurance? It all depends on your financial circumstances and health. But you need to be aware that you could incur a huge bill. And you need to think through how you would handle that if it did occur.

• Determine Your Long Term Care Needs
• What You Need To Know About Long Term Care Insurance Before You Retire
• Protect Your Retirement Savings From the Costs of Long Term Care
• How To Create a Long Term Care Plan
• What You Should Know About Medicare before Age 65

Reviewed January 2024

About the Author

Gary Foreman is the former owner and editor of the After50Finances.com website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.