The Dollars and Sense of Long-Term Care Insurance

Posted by Richard on May 8, 2018

The majority of people — about 63 percent — will spend nothing on long-term care, according to data by the Department of Health and Human Services.

Still, for the remainder, long-term care can be an expense that eats up savings.

HHS estimates that 48 percent of people who need long-term care will need it for less than one year, while 21 percent will need care for 2 to 5 years, with monthly costs of $5,000 to $7,000.

That could rapidly eat up savings.

One way to protect savings is to get long-term care insurance to pay all or part of the cost for a period of time.

Traditional LTC policies pay about $150 to $160 per day for a limited period, from one year up to 3 years, according to AARP. However, these policies are only sold by about 15 companies. Premiums of $225 to $250 a month (or $2700 annually) are not guaranteed and can rise sharply.

A new hybrid type of policy combines whole life with LTC, with discounts for couples. These have the advantage of building equity and can return money to heirs. Premiums are very high but they are locked in.

As with all LTC policies, the earlier you buy them the less the premium.

A traditional LTC policy for a 55-year-old couple is about $2,100 per year. A hybrid costs about $8,100 per year, according to AARP.

If you wait until you are 65, the traditional policy could run up to $3,700 per year for a couple, while the hybrid would cost $13,800.

Waiting just one year to take coverage from age 64 to age 65 can cost up to 10 percent more, so buy early if possible.

Shop around. Policies vary in cost.