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Buying Long-Term Care Insurance... Page 2

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The Premiums

Once you've compared what the policies cover, it's time to take a look at premiums. They vary widely. Yearly rates can range from $500 to $2,500. On the low end is a person who's young (age 40) and looking for a minimal level of benefits. The rates will go up as you get older, get sicker or want more coverage.

Then check the actual costs of nursing homes in your area. That will give you an idea of how high your bills would be. Pay them a short visit to decide if you'd be willing to live there. You're trying to find out what it would cost for a level of care that's acceptable to you.

Amount of Coverage

Next, begin to think about the how much coverage you want. You don't need to insure for the entire amount. For instance, if you expect the annual cost of care to be $40,000 and you have annual income of $25,000 you might want to buy a plan that would pay the difference of $15,000 a year. That would be about $45 per day.

Also, remember that it doesn't take much inflation to significantly increase costs. As we mentioned last week, a 5% inflation rate will double the cost of an item in 14 years. If you're 65 today it's possible that you could live 28 more years. And in that time a $100 a day room would increase to $400 per day!

One way to reduce the cost of the insurance is through careful selection of deductibles and elimination periods. You can choose how long you want to be in a hospital or nursing home before the benefits begin. If your goal is to protect your assets, a one year elimination period could make sense. That will reduce your premium.

Make a Decision

Once you've collected quotes from the different sources it's time to rank the companies. If you decide to apply for insurance you'll want to start with the top of your list. Then, if you're turned down by your first choice, you can apply to the next until you find coverage.

Should everyone buy long term care insurance? Of course not. But you need to be aware that you could incur a huge bill. And you need to think through how you would handle that if it did occur.

Thanks to Vivian for launching us on an interesting discussion. We hope that she and her husband, as well as all of our readers, never have the need to use a long term care insurance policy. Even if you've paid for one!