Long-Term Care Insurance

Armed with the right vocabulary, you can make a smart choice.

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Care Insurance Basics

Long-term care insurance covers much of the cost of nursing-home care, at-home care, assisted living, and adult daycare. But policies are not standardized, and coverage can vary greatly depending on what you choose in a policy.

The national average cost of nursing home care is more than $51,000 a year, according to the General Accounting Office, and those costs are expected to triple by 2020. Additionally, the average annual cost of limited home healthcare is more than $36,000, and basic care in an assisted living facility costs $26,000 on average, according to the GAO.

Compare those costs to premiums for long-term care insurance. According to the Health Insurance Association of America, long-term care policies cost, on average, $888 a year at age 50, $1,850 a year at age 65 and $5,880 a year at age 75.

There’s no hard-and-fast rule as to when you should buy a long-term care insurance policy. The younger you are, the less expensive the premiums will be. And there will be a point as you age when premiums become prohibitively expensive, if you’ll qualify for a policy at all. If you buy a policy when you’re younger, and can lock in premiums, you’ll still pay the same premium when you’re older.

Long-term care insurance is generally purchased between the ages of 40 and 84, but the most common age is in the mid 50s, says Laura Schoenborn, a certified financial planner with Legacy Capitol Partners in Milwaukee, Wisconsin. When you reach age 85, it might be hard to find a policy at all, because as you get older, you’re more likely to need care and insurers may reject your application.

Many people decide to buy based not just on their age, but on whether they can afford to pay the premiums. Schoenborn says many people in their 50s, for example, may wait until their kids are out of college to buy so they can better afford the expense. Others in their 60s may wait until they near retirement, and then they can stop paying disability insurance and transfer those premium payments to a long-term care policy.

What to Buy

No matter when you buy, you have a lot of control over how much your policy will cost, depending on the coverage you choose. Here’s a look at the biggest decisions you’ll have to make when you choose a policy.

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