Ask Kim
Research Your Long-Term Care Needs
How much of a daily benefit should I get when buying a long-term care insurance policy?
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
April 10, 2002
I'm about to buy a long-term care insurance policy and am trying to figure out how much of a daily benefit to get. What do you recommend?
To give you a general idea of the costs, the MetLife Mature Market Institute just announced the results of its latest nursing home cost study. The average cost of a nursing home stay in the U.S. is $168 per day for a private room, with an average annual bill of $61,320.
But the costs vary significantly from state to state (even city to city). Stamford, Conn., was the city with the highest average costs ($347 per day) and Shreveport, La., had the lowest average costs ($88 per day). Because of this variation, it's best to call some of the nursing homes in your area and see how much they charge. Then buy enough long-term care insurance to cover most of the bill.
If you're younger than 70, make sure the policy includes a 5% compound inflation rider. This often doubles the price, but is well worth the money. The average cost of a private room rose by 9.8% since the last time the MetLife Mature Market Institute conducted its study, which was nearly two years ago. Although some of the cities surveyed are different this time around, it still shows that average nursing home rates are generally rising at a pace of about 5% per year.
If you don't buy inflation protection, your insurance could fall short of your bills. For example, if rates continue to increase by 5% per year, the average private room would cost $273 per day in ten years ($99,645 per year); or $446 ($162,790 per year) after 20 years. That would leave you on the hook for nearly $100,000.