A study by the U.S. Department of Health and Human Services has shown that people age 65 and older face at least a 40% chance of entering a nursing home sometime during their lifetime. About 10% will stay there 5 years or longer. With the average annual cost of a nursing home at $50,000 or more, this form of long term care can quickly deplete the assets of a senior and perhaps the family members who care for them.

Many people are under the mistaken impression that Medicare or Medicaid will cover the costs of long term care. Medicare only covers care for short periods of time, such as rehabilitation following an illness or injury. It does not cover help with activities of daily living (ADLs), which include bathing, toileting, dressing, eating, transferring out of bed and incontinence care. Medicaid only pays for people meeting federal poverty guidelines, or for nursing home residents who have exhausted their savings and become eligible.

So what’s the solution? Long term care insurance is an option to consider as part of your retirement planning. Long term care insurance was first introduced in the 1980s. It was originally meant to cover only nursing home care, but now covers:

• Home care
• Assisted living
• Adult daycare
• Respite care
• Hospice care
• Nursing homes
• Alzheimer’s facilities

There are a variety of policies and premium levels available through long term care insurance providers. Here are some important things to consider as you work with your insurance professional to determine the long term care solution that’s right for you.

1. Buy it early, while you are still healthy. They younger you are, the more likely you are to qualify for coverage. Once you have been diagnosed with certain medical conditions you will not qualify for coverage. Premiums are cheaper when you’re younger and many insurance companies won’t offer plans once you are into your 80s.
2. In addition to age and health, the three factors that have the greatest impact on determining your premium are: the daily benefit (generally $100, $150 or $200), the length of coverage (most people buy three years of coverage) and the inflation protection you choose.
3. Opt for an “alternate care benefit” which recognizes that new trends in care are emerging and allows for coverage in the future for long term care that is not specifically spelled out.
4. Ask about a “shared care” option that gives you and your spouse access to each other’s benefits if you use up your own.
5. Look for tax breaks. Some states offer an income tax credit for annual premiums.

Long term care insurance can protect your assets, and ensure that you receive the care you need without having to rely on your loved ones. For more information and a cost calculator, refer to the Long Term Care Insurance National Advisor Center.