What You Should Know About Long-Term Care Insurance

Some caregivers find that eventually they can no longer provide all the care that their family member needs. Long-term care is often the next logical step, but it can be quite costly. Nationally, the cost of care in a private room of a nursing home averages $194 a day, according to the Genworth Financial 2006 Cost of Care Survey. That's more than $70,000 annually. Costs vary widely, though, from a statewide high of $524 in Alaska to a low of $116 in Louisiana.

Who Should Buy Long-Term Care Insurance?

Not everyone should purchase long-term care insurance. For example, if the person can afford to pay for his or her own care, such a policy isn't necessary. Also consider cost: Long-term care insurance is expensive, and any decisions should take into account how a person would be able to pay premiums while living on a post-retirement income.

You'll need to ask yourself how affordable this is for you. Obviously, no one should forgo necessities such as utilities, food, or medications in order to purchase long-term care insurance. On the other hand, long-term care insurance may be worthwhile if the premiums are affordable and the buyer has significant assets to protect, doesn't want to depend on others to help pay for long-term care, or wants to control where and how he or she receives long-term care.

When Should a Policy be Purchased?

It's important to consider this option early because the best rates and range of services are available when a person is still healthy. While middle age is the best time to think about buying long-term care insurance (that's when a person is most likely to qualify for a policy and when premium costs will be at their lowest), most people don't consider long-term care insurance until they are much older and their health is beginning to fail. At this point insurance may be prohibitively costly or simply unavailable, since some insurers have restrictions on the age and health status of buyers.

Consumer Reports warns, though, that there may never be a good time to buy. While your premium is lower at age 40, you may be paying that annual amount for as many as 40 years before you start collecting on benefits. And premiums can rise — sometimes quite precipitously — whenever state insurance commissions approve insurance companies' requests for rate increases.

How Do Policies Work?

With any long-term care insurance policy, the buyer must make important choices about coverage. These choices will determine the amount of the premium. Generally, policies that cover a wide range of services in a variety of settings charge a hefty price.

Group vs. individual policies. Group policies may be available through an employer or membership association. Federal and U.S. postal employees, veterans, and current armed services members and families may be eligible for group policies, too. Policies sold directly to individuals may be more costly, yet sometimes they offer more protection for the consumer.