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Think Long-Term Care Now, for Later Comments

  • By Suzanna de Baca
  • September 15, 2011

Close-Up of Grandmother and GranddaughterWhen I announced that I would use my "Money Day Off," earlier this summer, to tackle my long-term care insurance policy (finally), many of you expressed an interest in LTC.

As a former financial advisor—and someone who has seen long-term care needs arise within her own family (all my grandparents needed some form of extended care)—I have a lot to share.

How important is this?

No one likes to spend money on insurance, but the extended care you may require as you age is typically not covered by a traditional health insurance policy, nor by Medicare. Medicaid policies offer limited (if any) coverage for LTC, and only after you've completely exhausted your own assets.

As a woman, this has enormous implications for your financial plan: more than 70% of nursing-home admissions are women, and at about $70,000 per year*, that's can eat up a big chunk of your savings—fast.

Yes, LTC is complicated and expensive. But getting it while you’re young and relatively healthy can buy you affordable coverage—and serious peace of mind. Got questions? Keep reading to learn more about:

  • Why I’m buying a long-term care policy when I’m only in my 40s
  • How much these policies cost
  • Ways to reduce the cost
  • Factors to consider when buying LTC coverage

Am I too young?

Several friends asked why I’d apply for a long-term care policy while I’m in my 40s. Answer: It's typically more affordable to buy LTC when you're relatively young and healthy. The policies I considered carried annual premiums in the $5,000 range. What if I waited 10 years? Similar coverage could cost me approximately 50% more.  

What’s covered by LTC?

  • An LTC policy can cover or help pay for a range of services, from in-home health care, to a nursing home stay to adult day-care and more. It depends on how much coverage you want and can afford.
  • The daily benefit for care typically ranges from $50 to $500 per day*. You can purchase a policy that includes inflation adjustment; this adds to the cost.
  • Lifetime policies are available, but two, three and five years of coverage are more common.

How much will this cost?

It’s typically based on the level of benefits, your age and various health-related factors.

One way to reduce the premium is to extend the “elimination period," i.e. the number of days before your coverage kicks in. The elimination period can range from zero days (meaning coverage starts immediately) to 180 days. You pay for your own care during that time, but the longer the elimination period, the cheaper your policy.
 
Suzanna de Baca is the vice president of wealth strategies at Ameriprise Financial.


* Source: U.S. Department of Health and Human Services, longtermcare.gov. Based on the 2009 U.S. average of $198/day for a semi-private room.
** Source: U.S. Department of Health and Human Services, longtermcare.gov.

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