Long term care insurance why not to buy

When it first became popular in the late s, long-term care insurance was cheaper and usually more generous than the policies being sold today.

It turned out that insurers had underpriced coverage. They overestimated the lapse rate, for the percentage of customers who would let their policies lapse before filing claims, and they underestimated how long people would require long-term care. Insurers were forced to jack up rates. Some exited the market. Consumers should understand what costs are covered when they buy long-term care insurance.

The activities include eating, bathing, getting dressed, using the toilet, remaining continent, and being able to get in or out of a bed or a chair. It is effectively the deductible. Most policies sold today have elimination periods of 30 to 90 days.

Policies vary in how much they pay out. They might opt for three or four years of coverage. The average woman stays in long-term care for 3. Couples can stretch their insurance dollars by buying pooled coverage. If a husband and wife each buy three years of coverage in a pooled policy, all six years can be used by either spouse. That will pretty much bankrupt everybody besides Bill Gates and Jeff Bezos. His wife disagrees, and wishes they had the coverage, he says.

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We've detected you are on Internet Explorer. For the best Barrons. Long-term care insurance, also known as nursing home insurance, has been widely advertised as protection against the costs of long-term care, particularly residential nursing facilities. However, this kind of insurance is expensive, and it often provides only limited benefits -- with many restrictions and conditions -- that may end up covering only a small percentage, or nothing at all, of your total long-term care costs.

Insurance companies market long-term care insurance by suggesting that consumers are likely to wind up spending years in a nursing facility -- a prospect that would wipe out their savings and perhaps leave them without a roof over their heads.

However, the actual odds of a long nursing facility stay are considerably lower than the insurance industry would like you to imagine, and with the protection afforded by Medicaid laws, there is virtually no risk of being thrown out of a nursing facility and into the street.

This is particularly true if LTC insurance is viewed as a safety net rather than as a financial investment -- and if your policy includes coverage for assisted living facilities. Those who buy long-term care insurance make the purchase at a median age of Before that age, most people cannot sufficiently predict what their finances and health will look like in the future to make an educated decision about LTC insurance.

And by the time seniors reach their 80s, the premiums for LTC insurance are usually unaffordable. The relatively slight chance that an elder will need three or more years of nursing facility care means that insurance companies do not pay out on their policies to nearly the extent that they suggest when they sell the policy.

When the policies' conditions, exclusions, and benefit limits are figured in, the performance of these policies has been quite poor -- at least in the decade of the s, for which complete statistics are available:. In all of these situations, LTC insurance failed to live up to its promise to help people avoid using up their savings or relying on Medicaid to pay for long-term care.

In other words, it was a lousy investment. In response to pressure from consumer groups, embarrassing media exposure, and increased competition from other insurers joining the market, LTC policies have improved somewhat in recent years. These improvements include clearer terms and conditions, which give consumers a better idea what to expect for their money.

Many policies now offer extended coverage to include some types of assisted living residences in addition to regular nursing facilities.

A number of policies permit elders to use a pool of benefit funds for either home care or residential long-term care, rather than only for one or the other. Requirements to qualify for benefits have also been loosened somewhat, and policies now routinely permit the policy holder to "step down" to lower levels of coverage, for a lower premium, if continuing to pay for the higher benefits becomes too financially burdensome.

Before you buy any insurance, talk to a trusted financial advisor to help you plan for long-term care expenses. Policies pay for nursing homes, assisted living or home health care — but what if you never need these services? New types of policies combine long-term care insurance with permanent life insurance, such as whole or universal life. If you want both types of coverage and can front the money, these hybrid options are worth a look.

Aside from the fact that you get something for your premium no matter what, the biggest advantages of combination policies are:. It takes only a few minutes to look them up on the websites of independent rating firms, such as A.

You might have to register on some sites to access ratings, but registration is free. The ratings agencies issue grades for insurance companies, and each agency has its own scale. Combination policies are complex products, and their costs and benefits vary. Before you buy, talk with a financial advisor who understands these products and can compare them to stand-alone long-term care and life insurance options. Years from now many baby boomers will need help with the daily stuff of life, like dressing, bathing, eating or remembering to take medication.

Long-term care insurance does. Yet faced with the coverage costs, many long-term care insurance shoppers get sticker shock and give up. The ideal age to start shopping? Apply at least 60 days before your next birthday to get a price based on your current age, advises Jesse Slome, executive director of the American Association for Long-Term Care Insurance. Prices vary by insurer for the same amount of coverage. Work with an agent who can sell — not just quote — policies from different carriers, Slome says.

A good agent will know which companies will likely accept you for coverage based on your health and give you the lowest price. Medicaid, the federal and state insurance program for people with low incomes, will pay for nursing home care, but to qualify, you have to spend down most of your money first. Yet most long-term care is provided at home, according to the HHS.