Finance Blog

Long-Term Care Insurance—Is It Worth The Cost?

Written by Ilyce Glink on November 5, 2012 in Insurance  |   3 comments

The question of how to pay for medical expenses as we age isn’t one many of us want to answer. It’s hard enough to think about not being able to get dressed, take care of ourselves, or move around our homes without wondering how much…

The question of how to pay for medical expenses as we age isn’t one many of us want to answer. It’s hard enough to think about not being able to get dressed, take care of ourselves, or move around our homes without wondering how much it will cost to get help.

However, those planning for retirement must consider the cost of medical care and long-term care insurance or risk blowing all their hard-earned retirement savings.

The U.S. Department of Health and Human Services reports that 70 percent of people who reach age 65 will need long-term care services at some point. With long-term care costs as high as $250 a day and rising, these medical expenses can leave many people penniless.

While Medicare covers medical problems like surgery or a hospital stay after a fall, it does not always cover the long-term maintenance care required as people age or develop chronic health problems such as Alzheimer’s disease.

Enter long-term care insurance

Long-term care insurance can be expensive, and many people overlook the need for it—only 10 percent of people in the insurance market have it. But experts say that it may be the best way to plan for the needs of middle-class families as they retire.

Long-term care insurance covers medical expenses when a person can no longer perform basic daily activities and needs either in-home care or a longer stay in a skilled nursing facility. This means that those with the insurance don’t have to spend down their savings or rely on family or friends to support them. Policies vary, but they generally cover participants for a set amount of time, which kicks in after a waiting period.

“You can really look at long-term care as a form of asset protection and not health care,” said Sandy Praeger, Kansas insurance commissioner and chair of the National Association of Insurance Commissioners’ Health Insurance and Managed Care Committee.

In particular, policies that are designed in partnership with state governments can protect your savings if your policy runs out. If you live out your benefit period, which is typically two years, and you need to start relying on your own resources, you can spend down those resources and become Medicaid-eligible, Praeger said.

It’s important to note, though, that you can keep the same amount of money that was spent on your insured care. So if your long-term insurance company paid out $100,000 in care, you can keep $100,000 of your own money, spend the rest, and still be eligible for Medicaid.

“Long-term care insurance is really for people who have assets to protect,” Praeger said. “If you have fewer than $100,000 or $50,000 in assets, you wouldn’t want to be paying the premium.”

How much will you pay for long-term care insurance?

The premiums for long-term care insurance can be costly, and some companies have been requesting that the federal government allow them to increase premiums by as much as 90 percent. The costs vary widely depending on your age when you take out the policy, your medical conditions, and the type of coverage offered, but Praeger said you can get a fairly good policy for around $200 a month.

Remember that Alzheimer’s and memory issues are big red flags that may preclude some people from coverage. There’s also a time limit for those shopping for long-term care insurance—turning 60 tends to trigger rate increases.

“The longer you wait, the more expensive it is,” Praeger said. “The ideal time would be in your 40s and 50s, except that it’s not ideal because that’s when those 40- and 50-year-olds are putting kids through college, so most people look into it in their late 50s and mid-60s.”

Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and at the Home Equity blog for CBS MoneyWatch.


  1. Joyce says:

    There’s a new type of long-term care policy that can protect your assets from Medicaid even after the policy runs out of benefits. These government-approved policies are like a traditional long-term care policy with additional consumer protection features.

    The Long-Term Care Partnership programs provide dollar-for-dollar asset protection. Each dollar that your partnership policy pays out in benefits entitles you to keep a dollar of your assets if you ever need to apply for Medicaid services.

    Here’s an explanation of how these policies work:


  2. johnson says:

    I believe that long term care insurance is worth the cost than paying for long term care itself. Many people are just looking at the cost of the policy, without even considering the prices of long term care, which is more expensive than any policy.

  3. Thomas says:

    I have Long Term Health insurance. I saw what custodial care could do a person’s savings when my father developed Alzheimer’s. I recently received a letter from the provider offering significantly lower rates for a three year or six year plan. As unpleasant a thought as an Assisted Living experience would be for an extended period of time, we must adjust our life expectations as we age. I just decided as I as am writing this to keep the open ended policy. When the insurer makes you an offer it is to the insurer’s advantage.

    - Thomas from http://www.lifeant.com

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