Over the past few years, long-term-care insurance policies have become more restrictive and premiums have spiked. Generous benefits, such as lifetime payouts, are extraordinarily expensive or have disappeared from policy menus.
With the cost of long-term-care insurance soaring, many people are taking a new approach to covering the risk, by covering a portion of the anticipated expense and calculating how much they can pay from savings. Insurers are also offering more-affordable policies. For example, some are selling policies with benefits that rise with the consumer price index or provide 3-percent compound inflation protection, rather than 5-percent compound inflation protection, and such policies can cost thousands of dollars less per year.
Also, look at how the policy counts days of care toward the waiting period, which is often 60 or 90 days. Some policies start the clock as soon as your doctor certifies that you need help with two out of six activities of daily living (such as bathing and dressing) or have cognitive impairment. Others count only the days that you receive care. Note that if you use less than your maximum daily benefit, you can extend the benefit period.
Some insurers are a lot stricter than others about which medical conditions disqualify you for a policy. John Ryan, of Ryan Insurance Strategy Consultants, in Greenwood Village, Colo., recommends that agents review your medical history and then find companies likely to provide the best deal for someone with your health conditions. For his clients, Ryan tends to work with Genworth, United of Omaha and MassMutual. John Hancock, New York Life and Northwestern Mutual are also big players in the long-term-care insurance business.
Premiums vary wildly, so it's essential to comparison shop. Recently, a policy for a 55-year-old with a $150 daily benefit, three-year benefit period and 3-percent compound inflation protection had an average premium of $2,110 -- but there was a 50-percent difference between low and high premiums, according to the American Association for Long-Term Care Insurance 2012 Price Index. To find agents who can offer quotes from several companies, visit the association's website (http://www.aaltci.org).
(Kimberly Lankford is a contributing editor to Kiplinger's Personal Finance magazine and the author of Ask Kim for Money Smart Solutions (Kaplan, $18.95). Send your questions and comments to email@example.com.)