retirement

Is long-term care insurance right for you?

You have three basic options, says Don Rosenberg, an attorney with Barron, Rosenberg, Mayoras and Mayoras PC, The Center for Elder Law. "You have to be rich. Or be poor, and go on Medicaid. Or you can plan."

Barron puts it much the same way. "You can either have the insurance in place or you can self-insure. Self-insuring means you pay out of pocket and hope you've accumulated enough wealth in your life to cover the cost of your care and not impoverish a spouse if there's still one living." The third option is Medicaid, he says, "which essentially means spending down your assets and working with an elder law attorney to protect what you can."

Clearly the preferred options are either to be so wealthy you don't have to worry about spending thousands of dollars on long-term care, or having insurance. Although a relatively new concept, long-term care insurance is becoming increasingly common, and the government's recent measures certainly encourage it.

Randolph J. Shine with Shine Financial Inc., in Deerfield Beach, Fla., traces the popularity of long-term care insurance to the Kennedy-Kassebaum Act, passed in 1996. Prior to the signing of this act, it was possible to distribute assets to family members in order to protect the income and go on Medicaid or other assistance. The Kennedy-Kassebaum Act and the recent Deficit Reduction Act make it more difficult to give away assets and apply for Medicaid. "The government flat-out said, 'We are not going to be responsible for providing long-term care,'" says Shine.

The insurance route

People buy health insurance or car insurance to protect themselves in case of illnesses or accidents. In the same way, long-term care insurance pays for the cost of home care or nursing-home care if and when it becomes necessary.

As with life insurance, buyers need to be healthy enough to qualify. Someone who has already been diagnosed with Alzheimer's disease, for instance, is not likely to qualify for long-term care insurance. You can't insure a house that's already on fire.

"I tell my clients that they should explore long-term care insurance if they're healthy enough, if they can afford it, and it won't affect their lifestyle," says Rosenberg. "The cost of an entire lifetime's premiums typically will never equal the cost of half a year's long-term care."

Shine provides prices for a standard policy that pays $160 per day with a 90-day elimination period (which means that the benefits won't start for 90 days). The policy provides coverage for five years and is priced for two different age groups. These premiums will vary from state to state.

Sample policy prices

50-year-old

  • $2,000 to $2,900 per year for a single person
  • $2,600 to $4,600 per year for a couple

65-year-old

  • $3,100 to $5,300 per year for a single person
  • $4,800 to $8,500 per year for a couple

In general, you pay those premiums until your benefits actually begin, although some plans are designed to be paid off in full within a particular time frame, for example, 10 years.

Who should get it?

It's unlikely that someone in his 20s or 30s is going to invest in long-term care insurance unless it's offered through an employer. Both Rosenberg and Barron suggest that people between the ages of 55 and 65 are ideal candidates.

"I think it's important to point out that most people are as healthy as they're ever going to be -- today," says Barron. "So it's hard to tell a 50-year-old that it's not appropriate for them to consider it.

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