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How much long term care insurance is enough? Posted: May 24th, 2010

By Maryalene LaPonsie

Like it or not, growing old often means needing extra care. It may be tempting to ignore this fact, but doing so may mean facing heart-wrenching and financially draining decisions in the future. So, prepare for your future health needs now by considering a long term care policy.

Most traditional health insurance policies, and Medicare, don't cover long term care such as home health care, assisted living, and nursing homes. Without long term care insurance, you could forfeit specialized care, pay out-of-pocket, or spend down assets until you're eligible for Medicaid.

Limited duration vs. unlimited benefits

Long term care insurance can end up saving you tens of thousands of dollars if you use the benefits. Because premiums can be high, especially for seniors, a limited duration policy may be a good option to consider. These plans offer benefits for a certain number of years in exchange for lower premiums.

There are long term care policies that cover two-, three-, and five-year periods, as well as unlimited benefit plans. Two-year limited duration plans are among the cheapest options available for long term care. However, you might wonder: Is that enough?

How long will long term care benefits last?

To determine whether limited duration plans offer enough coverage, the American Association for Long-Term Care Insurance (AALTCI) recently had Milliman Inc. to study the issue. The study indicates that a limited duration plan may be a good buy for many Americans.

Most policies allocate a pool of money to reimburse long term care expenses. Depending on the type of care you require, you may have money left in your pool beyond the duration period of your policy. For example, according to the AALTCI study, approximately ten percent of those making claims on a three-year duration policy received benefit coverage after 36 months.

When comparing policies, be sure to review how claims are processed and whether you can use your policy after the duration period ends.

Long term care statistics

While it is reassuring to know that a two-, three- or five-year limited duration policy can give you extended benefits, the question remains: how much long term care insurance is enough? The answer from the AALTCI suggests a three-year benefit period is enough for most people.

Among the report findings:

  • Nearly 60 percent of long term claims begin after age 80.
  • In a typical scenario involving an 82-year-old claimant, men have a 12.4 percent chance of exhausting their benefits under a three-year limited duration policy.
  • Using the same scenario, women have a 23.5 percent chance of exhausting their benefits.
  • Women are statistically more likely to need long term care and make claims on their policies.
  • The greatest number of claims (42 percent) are for home care.
  • The average cost of long term care ranges from $21 an hour for home care to $80,300 per year for a private nursing home room.

Although a limited duration plan might offer affordable long term care premiums, every situation is unique. Comparing several insurance quotes can help you find a long term insurance policy that provides adequate coverage at a reasonable price.