A:

Long-term care insurance (LTCI) covers the risk that individuals may need medical and custodial care, either at home or in a skilled nursing facility, at some point in their life. Most workers wait to purchase an individual policy as they approach retirement or their group employer benefits are about to expire. Surprisingly (according to the Journal of Financial Planning, February 2009), nearly half of all group long-term care claimants in 2007 were under the age of 65. Costs ranged from $19,296 for in-home care in Louisiana to $177,634 for full-service nursing home care in Alaska. On average in the United States, you could expect nursing home facility care to run between $60,000 to $100,000 per year.

The cost of long-term care facilities and care has and will become even more expensive as our population continues to get older. One way to protect your family assets from being eroded by these costs is to purchase a long-term care policy. Even if you feel that you have sufficient assets saved to cover these costs, you may want to reconsider the benefit of having a LTCI policy as a hedge to protect your estate. If you or a parent are admitted to a nursing home facility at $80,000 per year, your assets would be depleted by $400,000 for a five-year stay in a facility.

When looking at the cost of LTCI it's similar to many other types of health and age related insurance coverages. The older you are and your current condition of health will play a huge factor in the size of your premium payments. Consider shopping for coverage while you are in your early 50s and in good health, you'll be able to lock in a cheaper premium and not have to worry about being denied coverage in the future for existing health issues.

Read Long-Term Care Insurance: Who Needs It? for more.

This question was answered by Steven Merkel.

RELATED FAQS
  1. Will Medicare pay for long-term costs?

    Long-term care refers to a variety of care services (medical and non-medical) that helps meet the needs of people who have ... Read Answer >>
  2. What role does the agency problem play in the modern Health Care industry?

    Read about the role of the principal-agent problem in the modern American health care industry, and learn why health insurance ... Read Answer >>
  3. Which insurance policies do I really need?

    Your needs for insurance depend on your situation and can't be generalized for everyone, but there are a lot of options available. ... Read Answer >>
  4. What are some examples of industries that practice price discrimination?

    Understand the various types of insurance coverage offered in the insurance marketplace, and learn why each policy should ... Read Answer >>
Related Articles
  1. Financial Advisor

    Advising FAs: Explaining Long-term Care Insurance to Clients

    As our life spans are extended, our family structures change and medical care improves, the need for long-term care (LTC) will continue to increase.
  2. Financial Advisor

    Taking The Surprise Out Of Long-Term Care

    Don't be caught unprepared - find out what to look for in LTC insurance policies.
  3. Insurance

    Long-Term Care Insurance: Who Needs It?

    No one is immune to the possibility of one day needing long-term care - and the costs can deplete a life savings.
  4. Insurance

    How To Buy Long-Term Care Insurance Cheaply

    Consumers looking for long-term care insurance shouldn't have to pay full price. Despite the sometimes-hefty costs, there are ways to save on premiums.
  5. Financial Advisor

    How Linked Benefit Insurance Policies Work

    Linked benefit policies can be a viable alternative to traditional long-term care insurance. Here's how they work.
  6. Financial Advisor

    Long-Term Care: More Than Just A Nursing Home

    Learn what you can do now to keep your options open in the future.
  7. Financial Advisor

    Can Long Term Care Insurance Be Affordable?

    The cost of managed care and insurance covering it will only become more expensive. Here's how to help your clients formulate a plan.
  8. Retirement

    Failing Health Could Drain Your Retirement Savings

    You may not be able to prevent illness, but it doesn't have to infect your savings.
RELATED TERMS
  1. Long-Term Care Ombudsman

    A government official who oversees nursing homes and assisted ...
  2. Skilled Nursing Facility

    A special facility or part of a hospital that provides services ...
  3. Nursing Home Placement Service

    A business that specializes in helping families and patients ...
  4. Group-Home Care

    Care given to a group of people with similar disabilities within ...
  5. Certificate Of Need

    An endorsement required by numerous states before the construction ...
  6. Representative Payee

    A long-term care facility that has been granted approval to accept ...
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  5. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  6. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
Trading Center