Long term care insurance is an important part of a personal financial portfolio. It provides insurance for for expenses beyond medical and nursing care for chronic illnesses (assisted living expenses). So while looking at your personal finance insurance needs (health insurance, disability insurance, automobile insurance, homeowners [or rental] insurance [with personal liability insurance – or separate personal liability insurance] and life insurance don’t forget to consider long term care insurance.
AARP estimates that a 65-year-old in good health can expect to pay between $2,000 and $3,000 a year for a policy that covers nursing-home and home care.
“About 70 percent of individuals over age 65 will require at least some type of long-term care services during their lifetime. Over 40 percent will need care in a nursing home for some period of time.” – National Clearinghouse for Long-Term Care Information
Premiums escalate as you age. For example, a plan that costs a 50-year-old $1,625 annually will run a 60-year-old $3,100 and a 70-year-old $7,575.
Insurers do offer lifetime coverage, but many people can’t afford the premiums. Instead, they purchase a specified benefit period, usually one to six years, and hope they won’t need more coverage.
As with all insurance you need to understand what coverage you are purchasing (including the risk of the insuring failing) and what is not covered. Given the long potential delay between when you buy and when you collect long term care insurance the failure to understand limitations can be dangerous. If you buy coverage with a specified period (say 5 years) when you are healthy and then get a chronic condition and wish to have lifetime coverage, you may well not be able to purchase such coverage (due to your health risk).
Those of you reading this in countries that provide universal health care might feel thankful they don’t have to worry about this. However, in many countries long term care insurance may still be wise. And if it isn’t today, it may well become so (the economic costs are huge so the macro economic trade-offs countries make may well change over time) so it is something that should be explored at least annually to determine what is the best option given your personal financial condition.