How can I figure out how much money I'll need for long term care?

A fellow caregiver asked...

I'm 56 and in good health and currently looking to buy a long term care policy. How can I know how much money I will need from my long-term care insurance policy to cover the cost of care later on when I actually need it? Is there some way to forecast this?

Expert Answer

Duane Lipham is a certified long-term care (CLTC) consultant who writes extensively on long-term care insurance issues. Lipham has also been a caregiver for members of his own family.

This is a very good question since the cost of long-term care is constantly rising. This makes planning ahead for long-term care costs essential when you are considering long-term care insurance.

The most common method used to assure adequate funds will be available in the future when the care is actually needed is to select an appropriate daily benefit that is currently in line with the costs of care in the area where you intend to retire. Then if you add a sufficient inflation benefit that will keep pace with inflationary costs as you age, the benefits will automatically increase each year until they are needed when you are older and require care.

When using this method it is good to decide how much of the cost of long-term care that you are personally willing to contribute out of your own funds or income first. If you want your insurance to cover all of the potential cost of care then you should most likely select a daily benefit that is line with the cost of nursing facility care in the area where you intend to retire as that will often be the most expensive care that you may receive.

However, if you plan instead to funnel some of your own unused funds or income to cover a portion of your care, decide how much you feel is practical for you to be able to do so and select a daily benefit that will allow for this coinsurance on your part. If you choose this method, please keep in mind that as the cost of care goes up due to inflation more funds will be needed to close the gap between what your insurance covers and what the cost of care actually is.

When you have the daily benefit set at a level that you feel is right for your circumstances and risk tolerance, then apply an automatic inflation benefit in the policy that is appropriate for your age. By following this plan your long-term care insurance policy should automatically keep your benefits up-to-date as you age and there will sufficient funds available for care whenever the policy is activated in the future.