Choosing Long-Term Care Insurance — Maximizing Your Dollars

The longer you live, the more likely you are to need nursing home or other long-term care (LTC). However, the cost of LTC has gotten significantly higher in recent years, with no sign yet of reversing direction.

For example, in November 2006 New York Life reported that a study commissioned by its Long-Term Care Division showed “the average cost for nursing home care in the U.S. climbed significantly in 2006. Costs for both private and semi-private care were 6% higher than in 2005. The average cost of a private room with a single occupant climbed to $204 dollars a day, or $74,445 per year. Non-private rooms, based on double occupancy, rose to an average of $180 dollars a day, or $65,700 a year.”

The study also cited Bureau of Labor Statistics that indicate “a healthy couple in their mid-60s has a 50% chance that one spouse will live beyond his or her 91st birthday.”

Consequently, purchasing a LTC insurance policy may be a good step for some people, but it’s expensive, and very few policy options are price-guaranteed. So if you’re considering buying a LTC insurance policy, how can you manage the costs to get the most for your dollars? Here are several tips:

Financial Considerations

Check the financial stability of the companies that offer the LTC insurance. Companies with high costs, low returns, minimal reserves, and other issues may be more likely to raise rates on products such as LTC insurance. It helps to get a qualified financial advisor to go over the numbers with you, since cost differences among LTC insurance policies are based on many factors. For example, insurance companies offering a wide range of insurance and investment products may be able to hold down LTC insurance rates more readily than a company that specializes in health-related products. But the health products company may offer a better LTC product or more options. Make sure you compare apples to apples.
Check the LTC insurer’s overall history of rate increases, as well as the history for the particular LTC product you are considering, to get a sense of what you might experience if you purchased from this insurer.
Some companies pay dividends (although these are not guaranteed) as a feature of their LTC insurance policies; these payments can offset increases in premiums or the cost of benefits.
Many insurance companies offer flexible LTC plans that let several family members, often across two or three generations, buy a policy that covers everyone. This policy can usually be tailored to provide different features, amounts, or other benefits to each insured person, or to provide a “pot” of money to be allocated to the insured individuals as needed.
Many LTC insurance plans allow a husband and wife to purchase individual policies at a combined discount. This price reduction is often 15-30%, and sometimes more, of the combined cost of two standalone policies.
Also, a number of years ago, the federal government decided that LTC insurance plans would be “tax-qualified,” thus providing certain tax advantages to LTC plan owners.
Remember – in all these areas, talk to a qualified financial advisor for more information and the potential effects in your individual situation. Be an informed consumer!

For more information, visit:

www.medicare.gov: click on Long-Term Care in the left navigation bar
www.insure.com: scroll down the home page for Long-Term Care Insurance Quotes
www.investopedia.com: enter “long-term care insurance” in the Search window
www.newyorklife.com/cda/0,3254,15833,00.html: New York Life press release - Average Cost of Nursing Home Care Rises 6% Year over Year, According to New York Life Long Term Care Insurance Study