8 tips for shopping for long-term care insurance

Tamara E. Holmes

If you ever become disabled or are unable to handle basic day-to-day tasks because of illness, long-term care can provide support ranging from 24-hour nursing home care to a home health aide to help you bathe.

But such care comes at a cost. A long-term care insurance policy can ensure that you live independently or have the supervised care that you need. Here's what you need to know to buy the right policy for you.

8 tips for shopping for long-term care insurance

1. Know your risk.

long term care insuranceLong-term care is something that 70 percent of people over 65 will need, according to the U.S. Department of Health and Human Services. Yet many consumers wrongly think it's covered by Medicare or even disability insurance, says Phyllis Shelton, president of LTC Consultants and author of "Protecting Your Family With Long-Term Care Insurance." While Medicaid provides access to long-term care services for those with low or no income, your choices of care centers may be limited, according to the Missouri Department of Insurance.

If you can't afford to pay for long-term care services out of your pocket, a long-term care insurance policy may be your best bet for getting the services you need.

2. Learn the costs of care in your state.

Long-term care costs can vary tremendously by state. For example, a private room in a nursing home can cost $61,503 a year in Texas and $91,250 in Oregon, according to long-term care insurance provider Genworth. Determine the average cost of care in your state and tack on about 5 percent in inflation a year to get an idea of how much you may need in your later years, Shelton says. So if a private room in a nursing home costs $200 a day today, you might expect it to cost 5 percent more - or $210 a day - a year from now.

3. Understand how policies are calculated.

Long-term care insurance policies provide a maximum amount of daily coverage for a certain period of time. For example, a policy might pay for $150 in long-term care services each day for three years. The more years of coverage you get, the higher your premium will be. However, most people who need long-term care services need them for about three to four years, Genworth spokeswoman Wendy Boglioli says, so you should aim for a policy that spans at least three years.

4. Consider the waiting period.

Most long-term care insurance policies designate a waiting period before you're able to receive benefits. Similar to a deductible, the waiting period requires you to pay for your own long-term care expenses during that time, whether it's one month or six months. The longer the waiting period, the lower your premiums will be, which may work fine for many people since "most people are not worried about getting through three months; they're worried about getting through three years," Shelton says.

5. Buy when you're young and healthy.

The cost of long-term care insurance goes up the older you are and the sicker you become, since you're more likely to file a claim. In fact, if you have a chronic condition such as Alzheimer's disease or Parkinson's disease, you may not qualify for a long-term care insurance policy at all, Shelton says. The younger you buy - in your 40s and 50s, for instance - the more likely you'll be healthy enough to get an affordable policy.

6. Brush up on different types of policies.

All long-term care insurance policies are not the same. For example, some insurers offer discounts of 25 percent to 40 percent for joint policies, which are two policies equally owned by a married couple or another qualifying partnership, Boglioli says. You also can buy asset-based policies, which are life insurance products that provide long-term care benefits. A long-term care insurance broker or agent can walk you through the different types of policies and help you to choose the best one for you.

7. Look into state programs.

If you buy a long-term care policy and your coverage runs out too soon, you then may need to turn to Medicaid for long-term care assistance. However, in order to qualify for Medicaid, you'd need to have less than $2,000 in assets in most states. Some states work with long-term care insurers to create special policies that meet state requirements.

If you buy one of these policies and your coverage runs out too early, you would be able to qualify for Medicaid even if you had assets equal to the amount of long-term insurance coverage that you had. So, for example, if you had a state-qualified policy with $100,000 in long-term care coverage and it ran out, you'd be able to qualify for Medicaid even if you had $100,000 in assets.

8. Check with your employer.

Before shelling out money for a long-term care insurance policy, see whether your employer offers it, the U.S. Department of Health and Human Services says. The federal government and many private and public companies provide long-term care insurance as a voluntary benefit, which employees pay for but typically at a lower rate through an employer's benefits package.