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Long-Term Care Worries

A couple wants insurance but is having trouble sorting through all the options

Long term Care Insurance policy on a table.
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The Problem

“I have been shopping for long-term care policies over the last several months and feel very confused, frustrated and overwhelmed,” wrote Sheila Mabbitt, 50, an airline pilot living outside Nashville, Tennessee. Mabbitt wanted policies for herself and her husband, Mike Sturm, a 59-year-old landscaper. She’s in good health. He has type 2 diabetes, which is under control. Their bigger concern was that his mother had Alzheimer’s. “We just want to be sure that if he needs memory care, it’s available to us,” she explained.

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The Advice

Long-term care can be expensive. Unfortunately, LTC insurance can be expensive, too, and terms can be complicated. Fewer than 10 percent of Americans 50 and older have it. (For more on America’s need for long-term care, see “The Crisis Everyone Must Face” in the May AARP Bulletin.)

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I’m constantly asked questions about LTC insurance. Here are my answers for Mabbitt and Sturm.

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1. Should we buy it? LTC insurance makes sense for a certain set of people: those who have too much in assets to qualify for Medicaid — which, unlike Medicare, will help pay for long-term care (in a nursing home or at home) — but who don’t have enough in savings to comfortably pay for care on their own. Mabbitt and Sturm sit in that category. “We’re watching friends’ parents,” Mabbitt says. “The next thing you know, one is in a full-time care facility and it’s draining their savings.”

2. When should we buy it? Mabbitt is at the age when experts typically recommend that people start shopping, says Jesse Slome, executive director of the American Association for Long-Term Care Insurance. Sturm’s diabetes is a reason to shop sooner rather than later, explains Slome, since finding coverage will be harder if his health worsens.

3. What kind should we buy? There are two types of policies: traditional and hybrid. A traditional policy entails pricey annual premiums. A 55-year-old male, on average, will pay $2,220 a year, and a 55-year-old female $3,700 a year, for a policy that will pay a benefit of $150 a day for three years, or $165,000 total, with a cost-of-living increase of 3 percent annually. If you don’t need care, you don’t get your money back. If you stop paying premiums, which tend to increase over time, you lose coverage.

A hybrid policy is a combo platter. It’s typically either a life insurance policy that allows you to dig into the death benefit to pay for long-term care, or it’s an annuity that pays more if you need care. Hybrids often have “limited pay” options, meaning you pay premiums for a set period of 10 or 20 years, then draw on them later in life.

Hybrid policies are typically more expensive than traditional ones, but these policies appeal to many people because they’ll get some money back even if they don’t need care.

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4. How do we buy it? Prices for all these policies have risen sharply in recent years. Annual premiums for 55-year-olds on that $165,000 policy have jumped at least 31 percent since 2020. Marc Cohen, professor of gerontology at the University of Massachusetts Boston, advises not to try to insure all your potential costs but, rather, to supplement your savings with a smaller policy that you can afford over time. “When you try to solve 100 percent, you often end up with nothing,” he says. Another savings tactic: Check for any group plans offered through your workplace.

The Outcome

After weighing all the options, which included plans offered through Mabbitt’s union, the couple this spring was leaning toward a hybrid life insurance policy. The premiums for this plan could be paid for in 10 years. “Our biggest concern is that we want the premium paid before retirement,” Mabbitt said. “I don’t want to be paying $6,000 a year until I’m 85 or 90.”

Want Jean Chatzky’s help with sorting out a financial problem? Send an email to rescue@aarp.org.

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