When Nursing Home Insurance Makes Sense

One type of insurance coverage that has generated a lot of interest lately helps cover the costs of long-term nursing care. It provides a benefit for people who have difficulty caring for themselves as they age.

From a wealth-management point of view, there are specific circumstances where long-term-care (LTC) insurance is most appropriate:

  1. You can afford the cost;
  2. You have assets that you want to preserve;
  3. You have a dependent (spouse or other) who would be disadvantaged in the event that you require a high level of nursing care.

Those who don’t meet one or more of the three criteria are poorer candidates for LTC insurance than those who meet some.

Like other issues in the area of risk management, the primary objective when considering LTC insurance should be to provide protection against catastrophe. Small risks, which are more expensive to insure against, may be assumed; large risks should be assigned to an insurance company.

Even where there are limited resources available to pay LTC insurance premiums, reasonable coverage can be obtained to cover the catastrophic costs. LTC insurance is similar to disability insurance in that there are three variables, which when adjusted can lower or raise premiums. In addition, there are numerous riders that can raise costs if selected.

The three variables:

  • Elimination or deductible period. This is the length of time, in days, that the insured must wait after qualifying for a benefit before receiving that benefit. The longer the period, the lower the premium.
  • Daily benefit. This is the amount per day that the insurance company will pay if the insured qualifies for a benefit and has gone through the elimination period. The lower the daily benefit, the lower the premium.
  • Benefit period. This is the length of time the benefit will be paid after the elimination period is met. The shorter the benefit period, the lower the premium.

Issues regarding long-term care are big ones, and failing to address the issue puts people and their families at risk.