Life expectancies have increased significantly and are expected to continue to increase in the future. As people age, however, they are more likely to develop conditions that limit their ability to live independently. Review your options for dealing with these costs.

 

Health insurance policies usually don't pay for nursing home care, while Medicare only pays for 100 days of skilled nursing home care if admission follows a hospital stay. Medicaid pays a significant portion of all nursing home costs, but the government has enacted tougher rules to qualify for assistance. Typically, you need to deplete most of your assets before you qualify.

Many elderly individuals rely on family members for help, but the personal toll can be huge. Currently, long-term-care insurance pays a small percentage of all long-term-care costs. That percentage may increase in the future as more people become aware of the risks and look to insurance as a way to fund those costs.

What Policy Options Should You Look for?

If you are interested in long-term-care insurance, you should look into the coverage when you are in your 50s or early 60s. Review the policy for the following features:

• The benefit amount should be reasonable. Most policies pay a specified amount per day, so you will have to pay the difference.
  
   
• Benefits should increase with inflation. You may not receive benefits for many years, so it's important to make sure that your benefit amount increases with inflation.
  
   
• Services covered should include skilled care, intermediate care, custodial care, home health care, and adult day care.
  
   
• No requirement should exist that you first be hospitalized to receive benefits, that you first receive skilled nursing home care to receive intermediate or custodial care, or that you first receive nursing home care to receive home care.
  
   
• Benefits should be payable when two or three activities of daily living can't be performed (bathing, dressing, eating, walking, transferring from a bed to a chair, using the bathroom, or remaining continent) or due to cognitive impairment.
  
   
• Specific coverage should exist for Alzheimer's disease and other organic-based mental illness.
  
   
• The policy should be guaranteed renewable, meaning the policy can't be canceled due to age or deterioration in health.
  
   
• Select a benefit period you are comfortable with.
  
   
• Select a reasonable waiting period. The longer you wait before benefits begin, the lower your premiums will be.
  
   
• Determine if the policy is qualified, which allows you to deduct a certain percentage of the premium, depending on your age, as a medical expense on your tax return. Medical expenses are deductible to the extent that they exceed 7.5 percent of your adjusted gross income. Also, payouts from qualified policies are federal income tax free.