One of the most critical decisions in buying Long Term Care Insurance is how much coverage to purchase.  The short answer is, it all depends on the problem or concern you are trying to solve.   Some people are very risk adverse because they have seen a long term Alzheimer’s illness or stroke affect a loved one and the astounding impact it can have, while others want enough coverage for the most common issues.

Current claims data shows the average claim will last about 3 years for women and 2.5 years for men.  For those with Alzheimer’s or a severe stroke, claims can look much different.  For example, according to the life expectancy after diagnosis of Alzheimer’s is 8-10 years with some living for 20 years!  When you consider the amount of care needed for this disease, the costs can very quickly get out of hand.

When thinking about how much coverage to buy, it is important to choose a plan and a price you can afford not just today, but when you are in your 80s.  A long term care policy is only good if it is inforce at the time of claim, so having a policy for years, only to drop it because it is too expensive, is a waste of money and will leave you unprotected.  You should also consider if you could afford to keep the policy if rates go up by 20-30% at some point.

We see two general plan designs from consumers.  Short and rich or long and stable.  Short and rich plan designs tend to be 1-3 years in benefit period and $4,500 and up per month in benefits.  These consumers are playing the odds that a long term claim won’t happen and if it does the benefit buys them time to financially prepare.  Long and stable plans tend to be 5 or more years in benefit period and $5,000 and up per month in benefits. Policies almost always include shared care when a couple is applying which gives greater benefit options.  These consumers most often have seen the cost of a long term health issue with someone close to them and want to be prepared.

No one has returned a benefit check to an insurance carrier because it was too small, because some insurance is better than none at time of claim.  The most important aspect of determining how much is enough is having a clear idea of the problem you are solving for and carefully considering what price is reasonable for you.

LTC Consumer is an independent, free online service to help consumers understand what long term care insurance is, how it works, and how to evaluate coverage options. Our mission is to provide an educational, no-pressure resource for learning about long term care planning, with the opportunity to speak with specialists who can help them.