How We Found the Best Long-Term Care Insurance
We all need help as we get older. There’s no way to predict exactly how much, but the US Department of Health and Human Services estimates that 70 percent of all Americans 65 and older will need some kind of long-term care during their lifetimes, and 20 percent will need it for longer than five years. The most expensive scenario is a nursing home (with average annual costs currently around $90,000/year), but having weekly or daily assistance in your home can still require $12,000 to $59,000 annually, according to the consultancy Long-Term Care Group.
“Traditional long-term care policies are more expensive today than ever before, but they still make sense for those who can afford them.”
Long-term care insurance is actually available in a few different forms: There’s traditional, stand-alone LTC coverage, and more recently, hybrid policies that are combined with something else (usually life insurance). We’ll touch on hybrids, but stand-alone plans are still the most widely used, and we did our deep dive on those.
Our list of LTC insurers to investigate started at 31. But we wanted to make sure our top picks were relevant to as many shoppers as possible, so we cross-checked to see which ones sold plans in at least 35 states, and also nixed any that had special eligibility requirements, or were the middle-men for policies backed by other insurers. That left us with eight insurers: Mutual of Omaha, MassMutual, Transamerica, New York Life, State Farm, Northwestern Mutual Life, Genworth Financial, and Nationwide.
We dug into each of their long-term care insurance policies, looking for:
Financial strength. An insurance company’s financial strength ratings are the most important indicators of its ability to pay its claims. Of the three largest independent ratings agencies, only A.M. Best rates strictly insurance, and we required a minimum grade of A- (“Excellent”). Then, because the Insurance Information Institute recommends getting ratings from at least two agencies, we also required one of the following: AA- (“Very Strong”) or higher from Standard and Poor’s, or Aa (“High Quality”) or higher from Moody’s.
Benefit periods as short as two years. A long-term care policy’s benefit period is the length of time it will pay for care after you make a claim. Ideally it’s as long as you need, but so-called “lifetime policies” are practically extinct today. Instead, most LTC policies offer a benefit period measured in years (though some use a “pool of money” model in which benefits are gradually subtracted from a lifetime amount with no set time period attached).
The average need for care in the US is currently about three years per person, so it makes sense to insure yourself for at least that length if you can afford it. But even if you can’t, a smaller policy can still be quite useful, potentially saving you from having to sell assets to pay for care. That’s why we required companies to offer benefit periods as short as two years: to make their policies affordable to more people.
“Some is better than none when it comes to long-term care insurance. Having benefits to pay for even some of the cost of care can reduce stress both financially and within the family.”
‘Waiver of Premium’ as a standard provision. With most insurance (like auto or homeowners), you continue to pay premiums even when you’re collecting benefits. But long-term care insurance typically kicks in at a time when most people are on a fixed, limited income, so the “waiver of premium” feature removes the burden of paying premiums once your claim is approved. It’s not standard on every policy, but it’s a no-brainer we wanted to see in all our top picks.
‘Shared Care’ rider available. This option is a way for couples to pool their coverage so that one person’s unused benefits are available to the other. “Shared care saves couples money by letting them each buy shorter policies than they would otherwise buy separately,” explains Mickey Batsell, board member at National Insurance Marketing Executives. Partners can each purchase a shorter, more affordable benefit period (say three years of care), but keep their partner’s identical benefits on reserve should they end up needing them (allowing each the potential for six years of care). There’s risk, of course, since the first person to need care could exhaust the entire benefit, but the flexibility granted by this rider is extremely valuable.