How much Long Term Care Insurance to Buy

Today’s blog post continues the series about buying long term care insurance as a strategy for planning ahead for long term care.  My post of May 22, 2014 discussed whether to buy long term care insurance at all.  My post of May 29, 2014 suggested looking for a stable, proven insurer.  My post of June 5, 2014 described how to identify a proven, stable Long Term Care insurance company.  My post of June 12, 2014 discussed the importance of protection against inflation. The introductory post in the series on planning ahead for long term care costs appeared on May 15, 2014.

Today’s installment discusses how much long term care insurance to buy as a function of how long you think you might need long term care.

The short answer is that you should buy enough insurance to cover 4 to 5 years of nursing home costs.

(Long term care insurance policies are not limited to nursing home costs.  Many or even most policies cover long term care costs provided at the insured’s home or at an assisted living facility in addition to nursing home costs.  I use nursing home costs and time in a nursing home as comparative measures for long term care insurance because nursing home costs are the highest of usual long term care costs.)

Why buy LTC insurance to cover 4 years of nursing home costs?

The average stay in a nursing home is approximately 3½ years.  Based on this average nursing home stay,  Consumer Reports (November 2003) recommends that people buy enough long term care insurance to cover 4 years of nursing home costs.

Note:  Be very careful in making any assumption that you will be average.  The 3½-year average is made up of many short stays (less than 1 year) and some long, long stays (longer than 5 or even 10 years) in nursing homes.

Why buy LTC insurance to cover 5 years of nursing home costs?

Five years is the “look back” period that Medicaid currently uses to determine whether applicants have improperly “hidden” assets.

If you eventually need long term care, you can use the Long Term Care insurance to pay for the first 5 years of that care and (possibly) set aside some of your assets as a comfort fund when the insurance coverage starts.  Then, while the look back period runs, the insurance will cover the cost of your care.  When the insurance runs out, the look back period (or most of it) also will have run, allowing you to qualify for Medicaid to pay for your long term care costs thereafter.

Note:  The look back period could be made longer at any time.

A wish for the future: Because the government can make the look back period longer, I’d like to see Long Term Care insurance companies allow policy holders to add years to an existing policy in reaction to a change in the look back period.  I am told that no insurer offers such extensions now, but I think it would be a great policy feature.

For more information, visit Jim’s website.

Jim Koewler’s mission is
“Protecting Seniors and People with Special Needs.”

For help with long term care or with planning for someone with special needs,
call Jim, or contact him through his website.

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