Pros and Cons of Long-Term-Care Insurance

Extended care in a nursing home can drain your savings. LTC policies can be a cushion—if you’re careful


Before weighing the pros and cons of different policies, the soundness of the companies selling them should be determined. A. M. Best, Moody's, and other such firms show ratings of insurance carriers on their websites, making it possible to quickly weed out questionable companies. The state insurance office can tell you how long a carrier has been licensed to sell LTC policies (and whether a company has hit existing policyholders with premium increases—a definite warning flag). At least 10 years' experience in the market is a good sign, says Beth Ludden, senior vice president at Genworth, which, together with John Hancock and MetLife, sold more than half of all LTC policies in 2006.

Because of the wide variations among LTC policies marketed by different insurers, says Bonnie Burns, a training and policy specialist at the consumer group California Health Advocates, several from a range of companies should be compared by dealing with an insurance agent who represents more than one carrier. Your state insurance department can lead you to licensed agents, and Slome's group has an online agent locator.

In the 20 years since the Krumpotichs bought long-term-care insurance, LTC policies have broadened their scope. Most now offer comprehensive coverage for care whether provided in a nursing home, in an assisted-living facility, or at home.

The policies also have become more flexible. Many insurers will pay for serv­ices that are recommended by a physician even if they are not specifically named in the policy. More insurers also offer cash-benefit policies, which make regular payments directly to policy­holders after they become eligible to receive benefits, without requiring reimbursement approval. This option would add about 30 percent to the premium, Slome says. But it would allow you to purchase monitoring devices or a specially rigged computer, perhaps, that would make your life easier. Or if family members are involved in your care, the cash could be paid to them for the time, perhaps even for their jobs, that they are giving up.

Corrected on : Corrected on 12/22/09: An earlier version of this article included incorrect titles for Jesse Slome and Beth Ludden.