Long-term care insurance pays for nursing home care, assisted living care, and often home care. It is particularly important for our aging population; the statistics indicate that 70% of individuals over age 65 will one day need some form of long-term care. The expense of long-term care increases each year, with the cost of a nursing home stay in excess of $12,000 per month in Pennsylvania. After years of fading as a popular method to pay for long-term care, there are signs that long-term care insurance is trying to make a comeback.

Long-term care insurance is typically purchased by adults in their mid-50s to mid-60s. The less healthy you are, the more expensive the insurance will be. There is even the possibility you will not be eligible at all. The traditional plans were “use it or lose it”, operating much like car insurance. If you did not file a claim, you paid premiums for insurance that was never used. Most plans covered nursing home care and assisted living care, while you could add a rider for home health care. Usually, the plans had a total amount of benefits with a daily rate that lasted for a specified number of years.

Although long-term care insurance policies became popular in the 2000s, they later fell out of favor due to sizable premium increases. The combination of an unanticipated lapse rate, the size of the claims, and low interest rates led to a downturn in the industry. Insurance companies left the long-term care insurance business, and many of them raised their rates on the insureds at an alarming rate. Large numbers of policy owners dropped or significantly cut back on their coverage.

Today, insurance companies are re-entering the long-term care insurance business, trying to correct the mistakes that were made in the past. They claim the pricing structure for new policies has been addressed with the hope that the premium increases seen in the last wave of policies will not occur again.

Some insurers are offering hybrid insurance policies. Typically, these are sold as life insurance with long-term care benefits. Many of the hybrid policies are funded with large, single premiums rather than annual premiums. The policies will offer a pool of money that can be used for long-term care costs if needed, and life insurance that will pay to the beneficiaries if not used for care.

Some of the factors to consider when purchasing long-term care insurance include:

1) Can you afford the annual premiums? Too often we have seen clients agree to purchase the insurance but as they age, they become unable to afford the policy.

2) Do you have resources to shelter from the cost of long-term care? For clients with more modest wealth, they may be able to qualify for Medicaid to pay for nursing home care and even engage in asset protection planning to qualify for the

Medicaid program. However, our wealthier clients, particularly those retirees who have sizable IRA’s, are unable to shelter these resources from long-term care costs and qualify for Medicaid. Therefore, long-term care insurance is attractive to clients with significant resources.

3) Are you interested in a benefit that will cover the cost of home health care? Government programs to pay for home health care are limited to those with low income and low resources. Home healthcare can become very expensive, particularly if care is needed around the clock. If you intend to age at home, long-term care insurance to pay for home health care will likely be attractive to you.

There are at least six prominent long-term care insurance companies offering products today. Don’t hesitate to shop and compare the different policies from these companies as their products and pricing structure can vary from company to company.