Long Term Care

Long-term care insurance is intended to reduce out-of-pocket costs if someone winds up needing long-term care from a paid provider. Long-term care insurance can pay for a nursing facility or home care, and many policies also cover assisted living, though no policy will pay the full cost of any of these. People usually pay premiums for 20 or 30 years before reaching an age when long-term care is likely.

If, like most people, you never need or qualify for the policy’s benefits, or you collect benefits for only a short time, those years of premiums will turn out to have been a wasted investment. For that reason, it’s best to consider long-term care insurance as a “peace of mind” investment rather than as a sound financial one.

Most people buy long-term care insurance in their 50s and early 60s. The cost goes up with age, but it’s still affordable for many people over age 65. Once you hit the mid-70s, though, the cost of a good long-term care policy becomes very expensive, and it may be difficult to qualify for if you already have health problems.

Even if you are in good health today, there’s a good chance that you’ll eventually need some type of long-term care, at least for a while. By 2020, roughly 12 million people over the age of 65 will require some long-term care, according to a study by the U.S. Department of Health and Human Services.

But that only gives a general picture. The hard part is figuring out in advance whether you’ll need a long period of close monitoring — daily or even round-the-clock care — that you’ll have to pay for. Some 70 percent of the elderly don’t pay for their care but get it exclusively from family and friends.

The odds of needing two years or more of extensive, paid care, is not high. Long-term care insurance, then, is security against a small but nonetheless real possibility of a lengthy, expensive period of care.