Most of us think about a long period of retirement in good health. But, we know that all the kale in the world doesn’t guarantee good health forever. Someday it will be harder to do the ordinary things and we won’t feel so great; someday our spouse might need help. How do we pay for help, nursing care or physical therapy?

Enter long-term care insurance, or LTCI, a policy that will pay for all kinds of care over the long haul, whether you’re in your own home, an assisted living facility or a nursing home.

“But wait!” you’re thinking. “Doesn’t Medicare pay my medical bills after I’m 65?”

Medicare does pay for hospital and nursing home stays (Part A); doctor visits, lab tests, medical equipment and such (Part B); and at least some medications (Part D).

Medicare will also pay for rehabilitation in a rehab facility or nursing home but only after a hospital admission and only for 90 days. It may cover some physical or occupational therapy at home, but those circumstances are limited.

DO YOU HAVE HELP?

Most importantly, Medicare doesn’t cover assistance with activities of daily living: dressing, bathing, toileting, walking, continence and eating.

You might think, “Well, we’ll live at home, and we can help each other. Someone can come in a couple of days a week.” That might work if your kids live nearby, or you live in a very connected community and know your neighbors (and your neighbors’ kids!) well, or if you wind up in a big-city apartment building with friends a couple doors away.

But kids move away for jobs. Neighbors change. Or maybe you don’t really want your friends to know you quite that well.

LTCI can pay for a home health aide to come in every day. If one of you gets a neurological disease like Alzheimer’s or Parkinson’s, LTCI can take a lot of the sting out of the bills at a continuing care facility, where the sicker spouse can have nursing care when needed, help with medications, and therapy, while the other spouse won’t have to be a constant caregiver.

CHOOSING A PLAN

So how do you go about buying a LTCI policy?

As with any insurance, the further you are away from needing the payout, the lower the premiums. Buying LTCI when you’re young and healthy is cheaper. Insurance companies can’t raise premiums for life events (like a diagnosis of early-onset Alzheimer’s), but the premiums will certainly go up a little bit every year, and you can expect a bigger bump at certain age bands, much like life insurance policies.

The policy should spell out the premiums over time. You can also purchase guaranteed level-premium insurance: the initial cost will be higher, but the premium will remain the same for a given period (again, the younger you are, the lower the premiums and the longer they stay low).  

About half the states in the U.S. have standards for premium setting; make sure you understand what your state mandates, if anything.

There are varying limits of coverage for varying premiums — more of a payout, higher premiums. All policies will have some kind of waiting period (known as the elimination period) before coverage is available, and the longer the waiting period, the lower the cost. (Think 30 days, 45 days, 90 days. Although, of course, this varies.)

MORE OPTIONS

Some companies will offer options to purchase more coverage over time — you might start out with minimal coverage for a low premium and gradually increase both your premium and your coverage. Ask what the purchase options are: Sometimes if you turn down the option a couple of times, that option is foreclosed.

You may want to consider a combination of life insurance and LTCI, especially if you are young and healthy. Pay a given premium for, say, 30 years, and at a particular age, the benefit amount becomes payable for long-term care instead of death.

Most companies offer inflation protection — a 2 to 3 percent annual boost in the payout. “Simple” protection means that the boost is based on the original amount available. Especially if you’re older, you probably want “compound” protection — meaning that the increase is applied to the currently available payout.

Talk through any exclusions with the agent offering the policy. Be sure common problems like heart disease and diabetes aren’t excluded, and by all means, get coverage for illnesses that usually mean a long period of gradual deterioration, like ALS or Alzheimer’s.  

Watch out for definitions that are too rigid: Dementia care should be covered regardless of the cause, which often can’t be diagnosed until after death.

CHECK THE STANDARDS

Ask how payment works if one of you needs some care, gets better and then needs care again — do you have to satisfy the elimination period again? (The answer should be “no.” Look for “elimination period: once per lifetime” in the policy.)
Typically, companies will offer a discount to couples buying policies to cover both spouses. Ask if you’re buying one policy that covers two people or two policies, one for each of you. Ask what happens to the benefits when one spouse dies — can the other spouse pick up the coverage?

The insurance commissioner in your state will have minimum standards for LTCI offered in your state; the policy should say upfront that it complies with those standards, but remember, those are minimums.  

Shop around! If your spouse is employed outside your business, they may have access to a policy through their job or a professional association.

EXPERIENCE MATTERS

The longer a company has been writing LTCI, the more likely it is that they have better actuarial models and offer realistic premiums in light of payouts they have had to make. Check the company’s website for its history. And check with your state’s insurance commissioner to see who is licensed in your state and look for complaints; check with the rating companies (Moody’s, Standard & Poor’s, and A.M. Best) for the company’s rating.

Above all, take your time to understand this topic. AARP is a great source of information (www.aarp.org) and so is your state’s insurance commissioner.

A certified financial planner (a fee-based, not commission-based, planner) can also help, particularly in understanding the relationship among Social Security, Medicare, any investments you have, and insurance. The National Association of Professional Financial Advisors (www.napfa.org) has a state-based directory.

LTCI is like all insurance: You hope you’ll never need it, but if you do, you’re best off if you get it long before that time comes.

If you’re approaching retirement now and haven’t looked into it, don’t waste time. And if retirement is the furthest thing from your mind, it’s never too soon to at least investigate your options.

If nothing else, think of it as one more guarantee for a little peace of mind in your later years.