Excerpt taken from ASK KIM, Kiplinger’s Personal Finance, 07/2009
You should consider buying long-term-care insurance no matter how much you have in savings. The potential price tag of a long illness is scary. The average cost for a private room in a nursing home is $74,208 a year, or $206 a day, according to Genworth Financial’s 2009 cost-of-care survey. If those figures continue to rise at the current rate (more than 4% per year), a year in a nursing home could cost more than $270,000 in 30 years.
That means a stay in a nursing home or an assisted living facility could quickly deplete your retirement savings, even if you start out with a substantial nest egg. Right now, most long-term-care claims involve in-home care, but that can cost even more than a nursing home. The Genworth survey found that the average state-licensed home health aide charges $18.50 per hour, which tops $220 per day if you need 12 hours or more of daily care.
To figure how much coverage you should buy, start by looking at the average cost of care in the area where you plan to live. The cost of a private room in a nursing home averages $49,153 per year in Idaho; but it runs $125,925 in Connecticut, according to the Genworth study. Buy inflation protection so that your coverage keeps up with climbing costs, especially if you’re in your fifties or sixties. The more difficult decision is the benefit period. Premiums for lifetime benefits are usually about twice as much as they are for a three-year benefit period, which is enough to cover the average length of care.
For more information about buying a policy and selecting an insurer, go to Kiplinger’s Long-Term Care Center (Kiplinger.com/yourretirement/longterm).