Thinking Long Term in the Short Term

A cash plan pays your maximum benefit, as long as you qualify for care under the policy terms. “You don’t have to incur expenses—you just have to qualify,” Wilson says. A cash plan allows a great deal of flexibility, letting you to pay for care by family members or others. But be careful, Newman warns. A cash policy can be twice as expensive as a reimbursement plan.

You should also make sure you have resources to cover care during the elimination period, or the time you’ll wait between the day you need care and the day your policy pays benefits. The length of the period varies by policy.

It’s also important to consider inflation coverage. Nursing home fees are going up at nearly 5 percent a year, according to the U.S. Department of Labor, so buy coverage that keeps pace. Peterson suggests 5 percent annual compounded inflation protection for those under 60, and 5 percent simple inflation coverage for those older than 60 who will weather fewer years of inflation before they use their coverage. A guaranteed inflation-protection purchase option—which gives you the right to add the protection to your policy later on—is another way to handle the question.

Some policies offer a survivorship benefit. Buy policies for yourself and your spouse, and the benefit will pay all policy premiums for the survivor when one of you dies. A survivorship benefit can add 8 to 15 percent to the cost of a policy, Peterson says, but can be a valuable source of security, particularly in situations where one spouse is financially dependent on the other.

Finally, experts say, you should consider your insurance company’s financial health before you buy. “Make sure the company will be around,” says Scott A. Wolf, director of development at The Columns Resource Group. Rating services such as Moody’s, Fitch, A.M. Best, and Standard & Poor’s all rate insurance companies; Wolf suggests looking for “the highest possible rating from at least two of those financial rating companies.” You should also make sure that the company has never raised premiums.

Funding the Plan

Long-term care insurance premiums vary widely, experts say, from a low of around $500 a year to an annual high near $1,500. “A really complete safety net for a person who’s old [age 75 or older] can be very expensive,” Wolf says.

Even if you must choose a cheaper policy, having some coverage will be beneficial. “Get what you can afford, but have something to protect yourself,” Peterson says. “Something is better than nothing.”