For instance, if your car is in a wreck, you need to have it fixed, so you take it to a body shop. If it breaks down, you take it to a mechanic. Long Term Care insurance works the same way. If you have a wreck, like a heart attack or stroke, you need to have it fixed, and this insurance can provide for a nursing home while you recover. It kicks in when you can’t do at least 2 Activities of Daily Living (ADLs) like dressing or cooking for yourself. If you break down, Long Term Care insurance is there if you need a visiting nurse or in-home caregiver to come in every day.
However, you, unlike your car, don’t come with a warranty.
If you keep your car for a long time, the car insurance rates go down because it doesn’t cost as much to fix it and eventually the car becomes worthless. This does not happen with Long Term Care insurance. As you grow older, your value does not decrease, even though you may feel worn out. Based on your age, the price of Long Term Care insurance goes up each year you wait to initialize your purchase. A 40 year old male in good health can purchase a policy for less than $900/yr that will give him lifetime coverage, adjusted for inflation, whether in his community or a nursing home. A 65 year old male, in the same shape and purchasing the same coverage will have premiums of $2500/yr. If both start to use their policy at age 80, they will put in roughly the same total amount in their lifetime. However, if they don’t start until age 85, the 65 year old will spend almost $10,000 more in annual premiums for the insurance. That is a far cry from worthless!