Health-Care Cost Expert Kathryn Votava on Buying Long-Term-Care Insurance

Many people rely on family and friends to provide care for them when they can no longer do it themselves. But at some point, the care required can be too much for these informal networks to handle. That's where long-term-care insurance comes in. Caregiving expenses are usually not covered by health insurance, and they can be staggering—a semi-private room in a nursing home, for instance, can run about $70,000 a year, and in-home care can reach as high as $350,000 for round-the-clock help. We asked Kathryn Votava, PhD, assistant professor of clinical nursing at the University of Rochester in New York and president of Goodcare.com, a company that analyzes health-care costs, for advice on how to shop for the best long-term insurance policy.

Q: What does long-term-care insurance cover?

A: Depending on what kind of policy you choose, it will pay for a nursing home, assisted-living facility, community programs, or for someone to come to your home to care for you. It can offset some of the costs—notice I said some. Most people think that if they have a long-term-care insurance policy, they're covered completely. Not only is the average policy not enough to cover the cost of this type of care, but people don't take health-care inflation into account. And you will still need to pay for your Medicare Part B, Medigap plan, prescription drugs, and doctor visits just as before. Those expenses don't go away and long-term-care insurance doesn't cover them.

Q: How much coverage should I get?

A: The average policy covers $149 a day. Now, if you live in some parts of Texas or Louisiana, that might cover your long-term-care needs. But in a place like New York City, the average is more than twice that. Get an understanding of what the costs are in your area. The two big surveys of nursing-home prices are from Genworth Financial and MetLife Financial. That will give you a ballpark figure, but even those underestimate how much it actually costs. I'd call a good nursing home or home health-care agency that you might like to use eventually. Find out what the daily cost might be, for example $300 a day, and buy the coverage that's closest to that daily cost. When it comes to 24-hour care at home, you will find that a long-term-care insurance benefit will not come close to covering that level of cost, because extensive in-home care is costly. Remember that once you have exceeded two to four hours a day, seven days per week of in-home care, you will probably be paying more for long-term-care than if you were in a nursing home. Therefore, if you need more than two to four hours per day of in-home care, your long-term insurance benefit may provide more long-term-care if you are in a nursing home.