Long-term care insurance: Is it right for you?

A growing number of Americans are buying long-term care insurance. Long-term care is a form of protection against the potential of a financial disaster resulting from an injury or from a long, debilitating illness.

Key Points

Joseph Smith, MD, FAAFP, is a self-described believer in the importance of insurance. A partner in a 4-physican family practice in Hillsborough, New Jersey, Smith has about $1.5 million in life insurance policies between his practice and his family, as well as a disability policy.

Late in 2009, he added another one, when he and his wife, Fern, decided to buy a long-term care insurance policy. "We'd been thinking about it for a while, in terms of what we want to do and how we want our finances to be when I retire," he says. "We also saw it would be less expensive now than if we waited until later." (Both are in their mid-50s.)


Matthew Grace, a financial adviser with Park Avenue Securities in Bethesda, Maryland, explains that there are several variables to a typical policy. First is the length of waiting period between the time of the first claim and when benefits actually begin, usually 30, 60, or 90 days. Second is the amount of the daily benefit, generally determined by the cost of nursing home or in-home care in a particular region.

Finally, there is the duration of the policy. Whereas insurance companies used to routinely write policies with lifetime benefits, the increasing number of claims in recent years has caused most companies to sell policies with limits on the number of years for which they will pay claims. In 2009, nearly half the policies sold were for either 3 or 4 years after the first claim is filed.