Considering long-term health care insurance

My motherin-law had to go into a nursing home and it was much more expensive than we expected. Is there a way to protect against this expense?

I understand what you mean. I just had a client’s monthly expense go from $4,700 a month in a retirement community to $8,800 a month in a long-term care facility.

For many Americans, buying insurance to cover your home, car and health is standard practice. But long-term care insurance is a mystery for many, even though it offers important financial protection against some of life’s uncertainties.

The goal of long-term care (LTC) insurance is to protect the policy owner from footing the entire bill of an extended stay in a healthcare facility, such as a nursing home or rehabilitation center.

Because there’s no telling whether you will need longterm care in the future, and the costs can run very high if you do, it’s worth your while to learn about your long-term care insurance options and make an informed decision.

It’s possible that at some point later in life you may need specialized care. For example, as you get older, your physician may discharge you to a nursing home following a hospitalization for surgery or illness. Fortunately, Medicare will cover qualified stays up to 100 days. Sometimes, however, deteriorating mental or physical health caused by an accident, illness or dementia will lead to an extended stay in a nursing home or ongoing inhome nursing care. When this happens, even families that are in a good financial position may need to balance the expense of long-term care with their other priorities.

While Medicaid will cover long-term care costs after 100 days, this federal program requires individuals to first deplete their personal savings, among other qualifications. For this reason, even individuals who are financially comfortable may want to carefully consider long-term care insurance.

Here are some factors to think about as you consider long-term care insurance:

• Your age and health may affect your eligibility. Purchasing a policy when you’re relatively young and healthy may mean more years of payments, but it also helps you lock in a benefit that may not be available when you’re older or in the event you experience a health issue. The cost of a policy tends to increase with age, particularly after age 60 when health problems start to become more common. If you have a pre-existing condition, or a family history of one, you may not be eligible to purchase certain policies. Carefully review the fine print to see if any conditions are excluded from coverage.

• Long-term care insurance policies come in many forms — from barebones to all the bells and whistles. Price is only one factor to consider. Compare components of the policies side-by-side to see which plan may make sense for you. Evaluate facilities and programs in your area so that you can match your service expectations with what various policies may cover.

• Most plans are tied to the need for assistance with a predetermined number of activities of daily living (ADLs) such as dressing, showering and eating. You will pay more if you want a policy that requires fewer concurrent ADLs to trigger benefits.

• Consider nursing home costs in your area to determine whether you want to buy coverage on the higher or lower end of the spectrum. Choose a daily benefit — or the amount of expenses covered each day — you can live with, as you will be expected to make up the difference.

• Most plans have an elimination period, which is the amount of time that must elapse before your insurance covers the bill. This “gap” in benefits ranges from 30 to 180 days. You are responsible for 100 percent of the costs before your benefits begin.

• Inflation protection is a common plan rider that can help offset rising costs of care by increasing your eligible lifetime benefits under the plan. It’s worth considering if you can afford the cost of a more generous lifetime limit.

Your financial advisor can help you calculate whether your projected future income and assets can withstand the cost of long-term care if the need arises. If there’s any doubt, a long-term care insurance policy may make sense. Together you can review your options and choose a plan that helps you meet your long-term goals for financial security.