Who Should Get Long-Term Care Insurance?

According to a MetLife survey, as of 2008, the average nursing home facility costs $213 a day. Based on a 3 percent inflation rate, by 2030, you could be paying $408 a day. (See References below.) In general, neither Medicare nor Medicaid cover long-term care (LTC). Private long-term care insurance will pay those costs, but is it really worth the investment for everyone?

Age Considerations

• Consumer Reports doesn't recommend purchasing a long-term care policy if you're under age 65. Most financial planners say if you wait much longer than that, you could run into affordability issues, or you may not be able to pass the required physical. Insurance companies will try to sell such policies to people in their 40s, but this is rarely necessary. On the plus side, your premiums would be lower at an earlier age, and you'd likely be healthy enough to qualify. On the negative side, premiums tend to rise, and you may find you can no longer afford the policy after you retire or the policy won't cover new types of care you need. This means you'd lose all the money you'd paid into the policy.

Family History

• Individuals who have a family history of dementia, Alzheimer's disease, neurological disorders or other chronic debilitating conditions are the ones who will most likely benefit from LTC insurance. Even so, you'll need to check the fine print of your prospective policy to make sure it covers care caused by those specific diseases. Also, most policies will not cover pre-existing conditions you have at the time you sign up for the policy, or they may require a waiting period before the policy pays for care related to such conditions.

Financial Considerations

• If you're in your 40s, financial experts recommend you shouldn't buy a long-term policy unless you can afford a premium hike of 10% to 20% and can continue to make payments for 30 or so years. For older people, financial planners say if you have a net worth below $200,000 to $300,000 (not including your home), an LTC policy won't be an affordable option. If your assets are at least $2 million, you should be able to pay for care yourself. If you're in between, you're a possible candidate for an LTC policy.

  A good rule of thumb is not to spend more than 7 percent of your income on premiums. To save money, check to see if your employer offers a group plan. Choose a 90-day elimination period (the time during which the insured must pay for their own care before benefits kick in). Opt for 5 percent annual compounding inflation, which costs a little more, but ensures your coverage keeps up with price increases. Finally, always keep saving. Even with LTC insurance, you'll wind up paying for at least some of your care.