Life Events

Long-term care insurance helps pay for help with daily living, such as bathing, dressing and eating, when you can no longer manage alone because of age, illness or cognitive decline. These services can be costly and are often not covered by regular health insurance or Medicare. Policies are complicated, so a careful approach pays off.

Is it right for you?

Coverage tends to make the most sense for people who have assets worth protecting and who could not comfortably pay for years of care out of pocket, but who do not have so much wealth that they could easily self-insure. People with very limited assets may qualify for Medicaid instead. Medicare covers only limited, short-term skilled care; see medicare.gov for what it does and does not pay.

When to buy

Premiums depend heavily on your age and health when you apply. Buying in your fifties or early sixties is typical. Waiting too long risks higher prices or being turned down for health reasons.

Features to compare

• Daily or monthly benefit: how much the policy pays toward care.
• Benefit period or pool of money: how long or how much overall.
• Elimination period: the waiting period before benefits begin. A longer one lowers the premium.
• Inflation protection: care costs rise over time, so a benefit that does not grow may fall short decades later.
• Where care can be received: home care, assisted living and nursing facilities.
• Benefit triggers: typically inability to perform a set number of daily activities or a cognitive impairment.

Ways to get a better deal

• Compare several highly rated insurers and ask for the same coverage from each.
• Look for discounts for couples or for good health.
• Consider buying less than a full policy, which may cover a share of expected costs.
• Understand that premiums on many policies are not guaranteed and can rise. Ask about the insurer's history of rate increases.
• Consider hybrid policies that combine life insurance or an annuity with long-term care benefits. They may cost more up front but often have fixed premiums.

Tax treatment

Qualified long-term care policies may allow part of the premium to count as a medical expense, subject to limits tied to age and to the rules on itemized medical deductions. Self-employed people may have additional options. Benefits from a qualified policy are generally not taxed up to certain limits. Limits are adjusted annually, so check irs.gov for current figures.

Before you sign

Read the exclusions, the process for filing a claim and the conditions under which the policy can be cancelled. Consider how the premium would fit your budget if it rises.

We can help you evaluate the cost against the rest of your retirement picture. Contact our firm to schedule a time to talk.