Nursing home insurance can be a bit of a misnomer. Only a small percentage of the population will live in a nursing home. However, over half of the people turning 65 now will require long term support services, which can include nursing home care, home care, assisted living and other options.
Choosing the right nursing home insurance now can help you secure your future.
Best Nursing Home Insurance:
- Best Overall for Nursing Homes: New York Life
- Cheapest for Nursing Homes: Genworth
- Best for Long Term Care: Mutual of Omaha
What’s Nursing Home Insurance?
The insurance industry commonly refers to nursing home insurance as long term care insurance, which better describes the breadth of coverage available.
With the median cost for a nursing home room approaching $100,000 annually, a change in health or an accident that affects cognitive ability can become expensive quickly. Nursing home insurance can help cover the cost of care, whether it’s a stay in a nursing home or home-based care.
What Does Long Term Care Insurance Cover?
Coverage can vary by policy or by the insurance provider, but coverage may be provided for the following types of long term care needs:
- Nursing home care. With the average stay in a nursing home at 2.5 years for women and 1.5 years for men, the costs can add up quickly and can put your family’s savings and assets at risk. Nursing home insurance can cover the cost, usually with a fixed amount per day in coverage.
- Assisted living. Not everyone with long term care needs will require a nursing home. Assisted living facilities are usually apartment-style units that cater to those who need personal care.
- Adult day care. In some cases, families can provide care in the evenings while a care facility provides care and support services during the day.
- Home care. Another form of long term care is home care, in which an agency or individual provides various home services ranging from bathing and grooming to housework.
- Care coordination. Coordinating various types of care can seem like a full-time job in itself. Some nursing home insurance policies provide coverage for a professional to determine care needs, locate suitable services and arrange for care.
- Home modifications. ome long term care policies also provide coverage for home modifications that may be required, such as wheelchair ramps, railings, or grab bars.
How Much Does It Cost?
Like most types of insurance, nursing home insurance is priced according to risk, which means it becomes more expensive to buy as we get older.
At age 45, you might pay $1,300 per year for coverage whereas if you purchase coverage in your mid-sixties, the cost can be double or even higher. However, even if the cost is $3,000 per year, the cost for care later can be much higher, making your premiums seem like a bargain if you do need long term care.
Expect costs for nursing home insurance to vary depending on your age but also by the policy coverage amount. A policy that provides $100 per day in coverage is likely to cost less than a policy that provides $200 per day in coverage. However, it’s possible that neither will cover your true costs if you need nursing home care, with a median cost closer to $250 per day. The length of the benefit period also drives rates, with longer coverage typically costing more but also providing better financial protection.
Other factors can affect the cost of nursing home insurance as well, such as the length of the elimination period for your policy; a shorter elimination period is costlier. When choosing a policy, pay special attention to the elimination period, which acts much like a deductible but is measured in time.
During the elimination period, the policy does not pay for care, which could add up to thousands or even tens of thousands of dollars in out-of-pocket expenses while you wait for coverage to begin.
Also, consider the cost of nursing home care in your state. In states where there are fewer providers, costs can be considerably higher and costs may be affected by several other factors. Texas, for example, is considerably more affordable when looking at the average cost of nursing home care. Connecticut, however, has nursing home costs nearly triple those of Texas and well above the average for all states.
When is Nursing Home Insurance Worth it?
Nursing home insurance isn’t for everyone and there’s a significant chance you’ll never need it — but if you do require long term care, you might be glad you had the foresight to purchase coverage. Here are some of the considerations you should weigh.
When it’s worth it
If you expect you’ll have limited savings later in life, a nursing home insurance policy can help prevent the forced sale of assets or a loss of freedom if you have to use Medicaid providers.
With an average stay in a nursing home at about two years and a median cost of nearly $1,000,000 per year, it’s easy to burn through savings and assets that may have been needed for a spouse or for yourself if your stay is temporary.
Middle-class households are often at the largest risk for medical-related expenses because they may not be eligible for Medicaid assistance, possibly forcing the sale of assets or liquidation of savings and investments to pay for long term care needs.
When it’s not
If you belong to a household with a significant amount of liquid investments or with sufficient income, may not need nursing home insurance. Assisted living or home care are more common and usually less expensive on an annual basis, but also may be expenses that last for a longer period of time than nursing home care.
When deciding if you need nursing home insurance, consider other income needs for the entire household to be certain that long term care, if required, won’t place a permanent financial burden on spouses or other family members.
How to Get Covered
It isn’t possible to predict when you’ll need coverage, but nearly 90% of long term care insurance claims are for those over 70 years old. Waiting until you’re in your 60s to buy coverage can mean fewer premium payments, but premiums will be higher and you’ll be uninsured during a time when you may still have an unforeseeable need.
A rider for married couples that provides coverage for both spouses can make coverage more affordable. Policy structures can vary, but coverage of both spouses can come with built-in flexibility to use the coverage for one spouse to provide for extended care for the other spouse.
The Best Nursing Home Insurance Companies
If you've decided that long term care insurance is right for you, make sure you pick from one of the best companies.
- Backing From a Storied Insurance Carrier
1. New York Life
Chosen by AARP as its exclusive long term care provider, New York Life is a trusted insurer with a storied history dating back 175 years. You can choose between a dedicated long-term care insurance policy or a life insurance policy with a long-term care rider, also referred to as a hybrid policy. You can also select a policy that only covers nursing home needs, which can save money on premiums but will not provide coverage for home care or assisted living needs.
Inflation protection is available as a rider to help address the rising cost of care and a waiver of premium rider helps reduce your ongoing costs if you need to make a claim.
You can choose a shared care rider that pools the benefit amounts for married couples and reduces total insurance costs. Some policies also offer a return of premium rider, which can pay a beneficiary for premiums paid into the policy minus claims made against the policy, subject to the policy’s provisions.
2. Genworth
Offering both individual and joint policies, Genworth combines flexible coverage options with affordability. Choose from elimination periods ranging from 30 days up to 180 days, depending on your budget for premiums.
Longer elimination periods reduce premium cost but require larger out-of-pocket payments for care. We calculated a premium for a joint policy with both 60-year-old spouses. The quoted policy provided $100 per day of coverage for about $1,600 per year with a 2-year benefit payout and a 90-day elimination period. Quotes for each applicant will vary based on coverage selection, age, health factors and other considerations.
Coverage from Genworth can cover home modifications, like wheelchair ramps, as well as in-home care or care at a facility. As one of the original companies to offer nursing home insurance, Genworth has proven its stability with over 40 years of experience and nearly $17 billion in paid claims.
- Medigap
3. Mutual of Omaha
Since 1909, Mutual of Omaha has been protecting families with a growing range of insurance products and financial services. We priced out a policy which estimated premium costs at about $125 per month for a 60-year-old single male.
The policy coverage provided $100 per day for long term care needs with a 90-day elimination period. With a spouse who also needs coverage, you can expect discounts of up to 30%. Sizeable discounts are also available for good health and for married status, even if your spouse does not need coverage.
Mutual of Omaha’s coverage includes care coordination by a care specialist, waiver of premium to reduce monthly expenses if you have a claim and alternate care that provides coverage for services that may become available in the future. You can also select inflation protection, shared care or a return of premium rider.
Choose the Best Nursing Home Insurance
Your choices for nursing home insurance range from single-purpose policies that only cover nursing home care to comprehensive policies that cover a broad range of long-term care needs. Health care needs can be difficult to predict and many consumers may be better served with broad coverage that can address several types of care. Review coverage options carefully, such as elimination periods, which can significantly add to your true out of pocket costs.
As with most types of insurance, policy terms can be complicated to understand. If you have questions, ask for clarification. The coverage choices you make now can affect your well-being decades in the future.
If you're looking to learn more about insurance, check out Benzinga's guide on the best health insurance, best short term health insurance and best life insurance for seniors.