Make Long-Term Care Coverage a Priority

Question: My husband and I have been wrestling with the decision to purchase long-term care insurance. We are now at the point where if we wait much longer, the starting price will be much higher.

We have narrowed our search to the company we want. The big debate has been whether to go with the less expensive three-year plan or a lifetime plan.

We will need a supplement policy once we have started Medicare; in the meantime, we are buying insurance through my husband's employer.

As we come closer to retirement, we want to cover the bases, but we don't want to take on too many obligations for fixed costs given the income we expect to have. Can you add any information or insights?

Answer: You obviously have determined that your retirement assets and resources would not be sufficient to cover the costs of extended long-term care. Needless to say, if the need does arise, it would be better to have some coverage than none at all. All other factors being equal, three-year plans can cost 30 percent to 40 percent less than lifetime plans.

Here are some factors to weigh when planning for long-term care:

a) The cost of home health care, assisted living and nursing home care in your neighborhood and nearby areas.

b) The ability of family members to come to your aid should you need assistance with commonplace living tasks at home.

c) Your physicians' assessment of your overall health prospects.

d) Your position concerning applying for government assistance (keeping in mind that most of government assistance in the form of Medicaid is targeted toward nursing home expenses rather than toward home care or assisted living, and requires spending down assets to qualify).

Many surveys and statistics have been generated to demonstrate the average length of stay in nursing homes. The fact is, the more long-term care insurance coverage you are able to purchase, the greater flexibility you are likely to have if the need arises for long-term-care services. Rather than relying on surveys to make your decision, I would advise making the decision as part of your overall financial and retirement plan.

Rhoda Israelov is first vice president-investments at Smith Barney in Indianapolis, and a certified financial planner. Send questions to Israelov at The Star, or at Smith Barney, 800 E. 96th St., Suite 400, Indianapolis, IN 46240; call her at (317) 818-7340 or at (800) 336-0095, or e-mail her at rhoda.israelov@smithbarney.com.

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