The way long-term care insurance is structured and priced has changed significantly in the past five years, with increased cost being the most dramatic difference.
This year, the major sellers of long-term care insurance are pushing through another change -- higher rates for women, says Jesse Slome, executive director of the American Association for Long-Term Care Insurance. This kind of rate change must be approved by state insurance commissions, which regulate insurance rates, and 16 states still haven't agreed. Those states will eventually capitulate, Slome says. In the meantime, if you're a couple or a woman thinking about buying long-term care as a part of your retirement planning, you may be able to get a price break if you live in a state that hasn't yet approved the switch.
Another change is the increasing availability of policies that allow you to buy more long-term care insurance in the upcoming years after your initial purchase. For instance, you might purchase a minimal policy when you are 50, healthy and not yet ready for retirement. These policies allow you to increase the value of the policy -- usually every three years -- without having to prove that you're still in good health. In fact, a bout of poor health might be the trigger that causes you to buy. Slome says that some companies put a limit on the number of times you can refuse its offer to buy more insurance, but others will let you buy an upgrade until you are as old as 80. "It makes a whole lot of sense to me to do it this way," Slome says.
Another relatively new feature that Slome believes couples should consider is shared long-term care. The shared-care option allows either spouse to tap the entire pool of money and reduce the overall amount of insurance they need to buy. The downside is that it could leave the second spouse without coverage if the first spouse uses everything. Slome says some companies offer the option to reinstate part of the money to protect the second spouse, but he says this isn't a universal option.
Slome also warns potential buyers to look hard at policies that combine life and long-term care insurance. Some of the policies, he says, have criteria that limit your ability to claim unless you have a terminal illness.
Here's a sampling of current long-term care pricing. "Good" policies provide $164,000 per person and aren't indexed for inflation. "Better" policies provide the same amount of coverage initially, but offer the option of buying more later without a health exam. "Best" policies provide the same initial coverage, indexed for inflation at 3 percent, compounded annually.
Single male, age 55. Good: $925/year; better: $1,045; best: $1,765.
Single female, age 55. Good: $1,225/year; better: $1,350; best: $2,307.
Couple, both age 60. Good: $1,980; better: $2,220; best: $3,840.