Long-term care insurance will protect my wealth

As I think about my finances, it's a lot more fun to imagine having money to travel, invest or spoil our kid with than it is to imagine myself or my husband old or disabled, unable to care for ourselves without substantial help.

In my dreams, we both drop dead suddenly, simultaneously and at advanced ages, without ever enduring a moment of poor health.

In reality, our grandparents and great-grandparents lived long lives and needed some help toward the end. There's a decent chance we will, too.

I suspect when we're in our 50s we'll probably buy long-term care insurance, which is designed to help families pay for the help their elderly or disabled members need.

Depending on the benefits you choose, a policy might pay for you to have help at home, in a nursing home, provided by a professional, or provided by a family member or friend.

The policy might have a limited dollar value or might pay out over a limited period of time — two years, say, or five.

If you don’t have long-term care insurance, the choices are fewer. Relatives or friends might look after you, especially if you're nice to them now.

Medicare will also pay for long-term care, but only after you spend down your assets. This government program will start covering your long-term care bills after you and your spouse are down to $78,500 in assets, plus a home and a car, or you alone are down to $14,400, with no house and no car.

That's not a ton of money, especially if you want to leave something to your heirs. That's why long-term care insurance is a popular asset-protection device as well as a way to make sure that your children and grandchildren don’t end up changing your diapers.

Long-term care insurance costs

The American Association for Long-Term Care Insurance estimated monthly premiums for two people based on their age when they bought the policy.

Age of couple Combined monthly premium
40 $83
45 $94
50 $110
55 $123
60 $162
65 $225
Based on preferred rates, $150 daily benefit, 3-year benefit period.

It's a helpful product, but it doesn't come cheap. It could cost you and your spouse well over $1,000 annually, depending on when you purchase the policy, and long-term care insurance premiums have increased by as much as 35% over the last five to 10 years.

One of the reasons the cost has increased as much as it has is that today's long-term care policy pays for more than it used to.

Many years ago, long-term care policies paid only for institutional care. Newer policies pay for both in-home and nursing home care, and that's driven costs up.

Not only are beneficiaries getting care in more settings, they're also living longer and needing more total days of care.

And care itself is getting more expensive, rising at a rate of 8% to 10% annually.

From an insurance company's point of view, women are particularly expensive. On average, women live longer than men, needing more care over more years. A woman might take care of her husband at home. Once her husband dies or if she is unmarried, she is much more likely tap her own long-term care policy for her end-of-life needs, especially if she has no grown children.

One way or the other, about two-thirds of long-term care benefits are paid for women, according to the American Association for Long-Term Care Insurance.

Insurance companies used to sell long-term care policies to men and women at the same base price. This year, however, insurers are raising prices for single women by 40% to 60% over what single men pay.

To implement the increase, insurance companies have to get approval from the state insurance commissioner in each state where the company does business. Companies that sell long-term care have approval for the price increase in about 28 states, but the price increase hasn't gone through in the other 22 states. Not yet.

Eventually, the price increases will be in effect everywhere. For now, though, if you live in Arizona, Arkansas, California, Colorado, Connecticut, Delaware,  Florida, Illinois, Indiana, Maryland, Massachusetts, Missouri, Montana, New Jersey, New York, North Dakota, Ohio, Rhode Island, South Carolina, South Dakota, Virginia or Wyoming — and you can move quickly — you may be able to get a deal.

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