Long Term Care

Lately I've been thinking about long-term care insurance for myself. I'm 45 years old.

Am I too young?

Lately I've been thinking about long-term care insurance for myself. I'm 45 years old. Am I too young?

A: No, although at this stage in your life, you may have more pressing financial concerns, such as putting kids through college and investing for retirement. Then again, don't wait until you're 80 to buy long-term care insurance. The older you are, the higher your premiums will be. Also, you could develop a chronic medical condition, such as arthritis, that might not be insurable. Recently the prices of new policies has increased.

How do I find a good policy?

A: First, look for an insurance company with strong financial ratings from services like AM Best, Standard & Poor's, Moody's and Duff & Phelps. Compare each insurer's ratings (e.g "A") with the rating service's highest ratings (e.g. "AAA")

Make sure your policy covers three levels of care: skilled (24-hour supervision), intermediate (nursing care, but not round-the-clock) and custodial (help with activities such as dressing or eating). Your policy should allow access to these services, either at a facility or from your home and include benefits for assisted living.

4 More Features to Think About

Your policy should provide benefits based on inability to perform activities of daily living. (ADLs) These are bathing, dressing, feeding, continence, transferring and toileting. (Transferring simply means moving from one place to another, such as from chair to a bed).

Your policy should also provide benefits if you are cognitively impaired; that is, if you can perform the physical functions but you are doing them at inappropriate times or places.

You'll also need to choose an elimination period, which is the amount of time between when care begins and when your insurance starts paying. Elimination periods range from zero to 90 days or more. The longer the elimination period, the lower your premium. But be careful, you might be better off paying a higher premium than paying for long-term care bills during a long elimination period.

You'll want to buy an inflation rider, to protect against the rising costs of care.

How much coverage do I really need?

A: Based on national statistics, you should purchase at least three years' coverage. When you do buy, you'll need to decide how much money you'll want to receive per day and how long you'll want the payments to continue. The national average cost for receiving long-term medical care is about $42,000 per year, or $115 per day. Since costs can vary by region, check facilities and services in the area where you plan to spend your "twilight years". It is important to consider "cost of living" increases in the benefit (COLA). This coverage helps benefits keep pace with inflating medical costs. Planning now for your long-term care is smart. As with most long-term tasks, the earlier you get started, the more options you will have.