Seventy percent of Americans over the age of 65 will likely require long-term care from a home health group, assisted living facility, or nursing home. How can you afford those health care costs, which general health insurance often does not cover? By obtaining long-term care insurance.

“When you envision your retirement, you never stop to think, ‘What if I’m unable to do the things that I can do today?’ And really, long-term care is all about having help to do basic things,” says Donna Peterson, senior vice president of Retirement Solution Strategies with Wells Fargo. Use this information to better understand the pros and cons of long-term care insurance.

Get an insurance safety net

Long-term care insurance offers some protection from the high cost of help you may need in the future — for example, an extended stay in an assisted living facility or a nursing home. Today, the cost of care can range from $40,000 a year at an assisted living facility to more than $85,000 a year for a private room in a nursing home.

The younger you are when you purchase long-term care insurance, the lower your premiums will be (though you will pay them for longer). The average long-term care policy costs roughly $900 a year in premiums when purchased at age 50. It goes up to $1,850 annually when purchased at age 65 and almost $6,000 annually when purchased at age 75. If you wait to buy long-term care insurance until you are experiencing health problems, you may find you aren’t eligible for coverage.

Know the benefits — and costs

Long-term care policies vary significantly in their benefits. Some cover in-home care, such as housekeeping, maintenance, and transportation assistance. Others provide full-fledged nursing home care. The costs of the policies reflect those benefits, but your present health and your family’s medical history can also affect what you pay.

Benefits are usually paid in the form of a daily allowance, but some policies have a monthly payment schedule. To ensure your policy’s benefits keep up with rising costs, you can opt for an inflation rider. An insurance professional or financial advisor can help you compare policies.

Balance needs and costs

Most long-term care insurance policies cap their benefits at a total dollar amount. Those that offer lifetime benefits eliminate the fear of running out of coverage, but they are very expensive. Because the average nursing home stay is about two and a half years, you may want to consider policies that come with four- or five-year limits, which are less expensive and more common.

That said, choosing a policy is all about balancing those costs and needs. “You might not get everything in a policy that you want because you just can’t afford to have something that would cover you for the rest of your life,” Peterson says. “Think about what is going to be sufficient coverage for you, that would protect you to the extent possible within the boundaries of what’s affordable.”

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