As more Americans are living longer, more will inevitably end up in long-term care at the end of their lives. This represents a considerable expense; according to the Kaiser Family Foundation, the average annual cost of nursing home care is $74,000. Hence, long-term care insurance has become a hot topic. While it can provide a great safety net if it’s appropriate, there are some disadvantages to taking out such a policy.
The biggest disadvantage of this type of policy is the expense. For many families, such policies will simply not be affordable since they cost thousands of dollars a year in premiums. Also, policies do not have a fixed premium rate. The costs can go up each year in an unpredictable fashion and will be highest as you reach old age, when your earning power may diminish but your need for coverage will peak.
Balancing a policy so that it exactly fills the gaps in the coverage you already have can be extremely tricky. You may have life insurance through a whole life policy that’s accumulating cash value, and you also have some limited right to long-term care coverage through Medicare. You want to choose a plan that maximizes the benefits you can gain later in life and does not duplicate what you already have.
Ensuring your policy will be adequate at the time you need it can be difficult. Inflation will inevitably erode the buying power of your policy when it comes time to use it, since the costs of nursing home care will have gone up. You can hedge against this by buying a policy that increases with inflation, but that is considerably more expensive than a basic policy.
If your policy is through your employer and is therefore a group plan, you could be paying more than you need to. If you are younger than average for your workplace, you’re paying a higher premium to cover older, sicker workers.
If you have health problems or particular medical conditions, you may find it hard to qualify for long-term care insurance, or the premium you are offered could be unaffordable.