Article: Long-Term Care Insurance: Think Before You Leap

Plan & Learn: Insurance

Baby boomers are closing in on retirement, and they worry about outliving their assets. Is long-term care (LTC) insurance the panacea? A recent study by Consumers Union reported that, "for most people, long-term care insurance is too risky and too expensive." It isn't a one-size-fits-all product.

Consider these factors:

  • When to buy. The younger you are when you buy your policy, the lower your premium will be. However, if you never use the coverage or your carrier drops the coverage, you've paid a lot of money for nothing. Consider buying LTC insurance before age 60 only if you have a chronic condition that can disable you over time. Otherwise, wait until you're 60 to determine whether you need coverage.
  • Choosing a carrier. Dozens of insurance carriers offer LTC coverage; you're probably better off with the big ones. Companies with high financial strength ratings (B+ or better) from A.M. Best or Moody's, for example, are likely to be around 25 years from now when you need the benefits.
  • Daily benefit amount. Daily benefits may range from $50 to $250 or more. Before deciding on a benefit amount, check the average cost of a private room in a local nursing home. Remember that the plan will pay only part of the daily benefit for in-home care.
  • Inflation protection. The cost of nursing home care is expected to keep increasing by at least 5% a year. Inflation protection may increase your premium and is worth every extra dollar.
  • Waiting period. You can cut your premium by choosing a longer waiting period and paying more of the bill yourself. But take time to weigh premium savings against your increased out-of-pocket costs.
  • Benefit period. Shortening the benefit period may be a safer way to reduce your LTC premium. If you have a chronic disease or a family history of Alzheimer's, consider a lifetime benefit period. Otherwise, a four- or five-year period should cover your needs or give you time to plan for a greater financial demand.
Copyright 2009 Credit Union National Association Inc. Information subject to change without notice. For use with members of a single credit union. All other rights reserved.