a frightening prospect. You fall and break a hip and
need several months of nursing home care. Or you’re
recovering from a stroke and need help bathing and
getting dressed each morning. Or your husband is
slipping into dementia and requires assistance with
scenarios are the type of care covered under long-term
care insurance, known as LTC insurance.
of 2012, an estimated 8.1 million Americans have bought
such policies, which can cover anywhere from $160 to
$250 a day for care at home, in assisted living or a
nursing home. Although fewer people today spend lengthy
time in a nursing home, the costs are daunting: a
one-year stay in a California nursing home in 2014 cost
an average of $94,400, according to the California
Partnership for Long-Term Care.
the policies can be pricey, and they’re not for
everyone. Here are some questions to consider if you’re
contemplating whether to buy an LTC policy.
What’s new with LTC coverage?
A lot has changed, said Bonnie Burns, a long-term care
insurance expert with California Health Advocates, a
nonprofit that promotes education and counseling for
Medicare and LTC coverage. Today, more people receive
long-term care at home, from family, friends or paid
caretakers, than move into assisted living. "That’s
a big change from 20 to 25 years ago," when most
people went to nursing homes, she said. "Many of
those older (LTC) policies don’t pay for the kinds of
things people use today, like home care or even assisted
living." Some older policies also had specific
requirements before they’d make claims payments, such
as requiring that in-home care be provided by skilled
LTC policies offer lots of choices, including how many
years you want to collect benefits, how much per day,
where you want to receive care and if you want inflation
protection. Also, as people are living longer and
dealing with dementia and other aging issues, a number
of companies have dropped out of the LTC market
altogether because it was no longer as profitable. Large
group plans have struggled recently with
higher-than-expected claims and rate increases of as
much as 85 percent. Many companies have had to initiate
rate increases of 40 percent or more to cover unexpected
expenses due to a high number of claims.
other states, some insurers are charging higher premiums
for women because they live longer and require more
years of long-term care. In California, there’s a bill
that would ban insurance companies from charging higher
premiums based on gender.
Who needs an LTC policy?
There’s no easy answer, Burns said. Somebody who has
$30,000 in income can’t afford the same premiums as
someone with $250,000 in income. "If you’re a
renter with $20,000 in savings, long-term care coverage
is not for you," she said; Medicaid will likely
cover your expenses.
choose to self-insure, feeling confident they can pay
out-of-pocket should the need arise. Others prefer to
buy a policy so they don’t drain money from funds or
assets they want to pass on to their children.
no rule of thumb. There are no guidelines," said
Burns. "Everyone’s financial situation is
different. These products should be tailored to the
individual’s economic circumstances, similar to life
What’s the best age to buy an LTC policy?
"It’s an expensive product," said Margaret
Reilly, program manager for the Health Insurance
Counseling & Advocacy Program (HICAP) office in West
Sacramento, which covers nine Northern California
counties. The average annual premium for a U.S.
long-term care policy is about $2,283.
you buy it young, you might get a decent rate," she
said. "If you try to buy it later, you can be
denied," either for age or health reasons. "If
you have any medical conditions, like cancer or high
blood pressure, you can be denied coverage or charged
exorbitant rates for premiums."
it doesn’t make too much sense to buy a policy before
your mid-50s, Reilly said. "It’s just years of
additional premiums and most of us would not need
long-term care in those younger years." But, she
said, you want to consider your family’s medical
history, as well as your own health issues, and obtain a
policy before you get a diagnosis that could eliminate
you from consideration. "The older you get, the
harder and more expensive it is to buy a policy."
be prepared to be quizzed before you buy a policy. Many
insurers are more closely scrutinizing your medical
history, even asking for cognitive tests, before
agreeing to issue a policy.
Where should you start?
Talk to a licensed insurance agent who has been
certified to sell LTC policies. You want a company with
a good track record and minimal number of rate
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Does California have stricter controls over how LTC
policies are sold?
"In California, because we’ve passed so many
consumer protection laws, we have some of the highest
standards in the nation for these (long-term care)
products and for the agents who sell them," said
insurance agents must have 16 hours of specialized
training in the first two years of selling LTC policies.
Consumers have 30 days after receiving a policy to
review it; if they change their mind, they can return
the policy and receive a full refund of any payments,
with no questions asked.
What if you’ve got an existing policy but get hit with
a big rate increase?
If you get a letter about a rate increase, carefully
review it, said Reilly. Some companies raise premiums at
certain ages, like 65 or 70. Other companies re-evaluate
their policies and raise premiums based on unexpected
levels of claims.
premiums hikes are significant, some insurers offer a
one-time chance to convert to a "paid-up"
policy, said Reilly. "Every dollar you’ve already
paid in will be held in reserve until needed. You’re
giving up the policy, but not losing the money, if you
need the care," she said.
it’s not automatic. The offer comes in a letter,
asking you to accept or decline. If you do nothing, the
company presumes you’ve accepted the rate increase,
How cost-conscious should people be when buying these
"It’s hard because these policies are
expensive," said Burns. "There’s no easy way
to make an apples-to-apples comparison, so people tend
to buy based on price. But if you buy a lower-priced
policy, you might very well buy something that’s going
to have a rate increase down the road."
the state Department of Insurance and others offer
online rate comparisons that will give you an
approximate price for premiums, based on your age and
type of coverage, exact policies vary from company to
company. The older you are, the higher the premium.
How should families be involved?
Involve your family members in what you decide to do,
said Burns. "When you need the care, you won’t be
the person dealing with the insurance company."
Several years ago, she had a case where a parent died
and the estate went through probate. When the safe
deposit box was finally opened, the family found a
long-term care policy that no one had known about. The
premiums hadn’t been paid so it had lapsed.
recommends that consumers sign up for a
"third-party notice," so that if the premium
lapses, you’ve named someone to be notified. It could
be a relative, an adult child, an attorney or someone
who could step in to be sure you don’t lose the
coverage you may need.
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What’s the best advice for someone contemplating
buying an LTC policy?
Do a lot of research. Get second and third opinions
about what a policy will cover should you need care.
"Nobody needs 100 percent coverage for their
long-term care costs," said Burns. It should be a
combination of what you can afford to pay in premiums
and what you might need in coverage.
you buy a policy, sit down with a HICAP counselor who
can give you an independent assessment of whether the
coverage works for your needs.
CARE: WHAT IT IS
care (LTC) insurance is designed to cover assistance
with daily living activities, such as bathing, dressing,
eating, toileting and moving from bed to chair.
Generally, LTC policies kick in when a person needs help
with at least two of those categories, either short-term
or longer. The cause can be due to illness, injury or
onset of dementia and Alzheimer’s disease.
The care can be provided at home or in adult day care, a
nursing home, assisted-living or residential care
Premiums varies greatly, based on your age, health
condition and type of coverage. Other coverage factors
that affect premiums: Amount of daily payments
(typically $160-$220 per day), the waiting period before
benefits start (also called "elimination
period"), whether inflation protection is purchased
and what long-term care facilities are covered (home
care, residential facility, etc.).
purchased: LTC policies are sold individually by
licensed insurance agents, but also offered by some
private employers, group plans or federal/state
by the numbers:
Average age of a U.S. consumer buying an LTC policy in
Average U.S. annual LTC premium in 2010
million: Estimated number of Americans who have LTC
policies, as of 2012
Number of Americans who took out new LTC policies in
America’s Health Insurance Plans; American Association
for Long-Term Care Insurance; California Partnership for