Currently, 12 million Americans need long-term care. By 2050, that number is expected to more than double. Long-term care (LTC) can vary widely — it includes everything from home health care and adult day care to residential care in assisted living or even nursing home facilities. Contrary to common belief, Medicare and other forms of health insurance do not cover LTC because it’s not considered a medical expense. And this is just one of the many myths and misperceptions about long-term care. The majority of Americans will live in a nursing home or other similar facility at some point in their lives. And anyone dealing with ailing family members learns that the costs can add up very quickly.
But there are ways to make long-term care insurance (LTCI) affordable:
1. Buy when you’re still young and healthy.
LTCI policies have strict underwriting requirements, and the chances of a disqualifying health event increase with age. Waiting until you're older or have a serious medical condition means higher premiums and possible denial. Plus, some hybrid plans have fixed premiums for life!
2. Read the fine print.
All policies have some conditions for which they exclude coverage — drug and alcohol abuse and self-inflicted injuries are standard exclusions, for example, so be aware. Some states still allow companies to require you to have been in a hospital or nursing facility for a specific number of days before qualifying for benefits. Make sure that Alzheimer's and other common illnesses, such as heart disease and diabetes, are not excluded.
3. Shop around.
Premiums can vary a lot, even for similar coverage. Compare information and estimates from at least three carriers.
4. Consider a joint policy.
A single policy that covers two cohabiting adults, such as husband and wife or even siblings, is another way to economize. Depending on the type of policy, there can be deep discounts on the premium.
5. Take the tax deduction.
You might be eligible for a tax deduction, which adjusts yearly! Check with your tax advisor.
6. Be flexible.
You can often adjust some of the terms of a LTCI policy or make certain tradeoffs to make the premiums more affordable.
- Limit the terms. A typical LTCI policy offers a term of 3 to 5 years and a total-dollar limit that corresponds to the cost of that much care in your area. If you’re extraordinarily healthy with a family history of longevity, a shorter term would be enough for you.
- One policy per couple. Some couples play the odds by buying just one policy for the younger spouse, on the assumption that she can care for the older spouse.
- Choose a longer elimination period. Most traditional policies have an "elimination" or "waiting" period of 90 days before your coverage kicks in, during which you're responsible for 100 percent of your costs. The shorter the elimination period, the higher the premiums.
- Be conservative with coverage. Although the average annual cost for a private room in a nursing home in 2016 was $92,378, or about $250 per day (in today's dollars), no rule says you have to buy that much coverage. You can shave your premiums by buying a smaller amount of daily coverage ($150, for example) to supplement where you pay the difference.
- Do spring for inflation protection. This feature adds to your cost, but it's important because it helps your benefits keep pace with the ever-increasing cost of care over the years between the time you purchase the policy and the time you claim benefits.
7. Look for group plans.
Employer group plans tend to be more flexible with medical underwriting, and less expensive too. They also tend to be portable, if you leave your job. Talk to your employer, if they are not yet offering LTCI.
By starting your LTC insurance now, you may be able to keep costs low on this essential coverage.
Carly Barker is a member of the DailyWorth Connect program. Read more about the program here.