It's the financial protection that many will need in retirement but few are willing or able to buy. Long-term care insurance scares off most people because of the cost.
For married couples, an increasingly popular option called "shared care" may make it more feasible by providing expanded coverage for less money than would otherwise be the case.
Under these joint policies, couples purchase a combined pool of benefits that can be used by either or both spouses.
Like most everything in the world of long-term care insurance, it's complicated. But what's clear is that fast-rising costs have made shared care a more appealing option. New long-term care insurance policies cost 30 percent to 50 percent more than five years ago, according to the American Association for Long-Term Care Insurance.
"When I explain how it works and what you get, most people like shared care a lot," says Brian Varian, long-term care insurance consultant for insurance brokerage Marsh Inc. in Woodland Hills, Calif. "It's very favorable for couples."
A look at the shared-care option within the broader context of changing long-term care insurance:
Q: What does long-term care insurance cover?
A: It pays for personal care received at home, assisted living facilities, adult day care or nursing homes. Benefits typically kick in when a person needs help performing at least two of the basic activities of daily living, which include bathing, dressing, eating, transferring to and from a bed or chair and using the toilet.
Q: Who needs it?
A: Long-term care insurance is considered essential for those who can afford it but don't have the resources to pay for years of future care. Health insurance and Medicare do not cover long-term care needs. And the financial burden is heavy for those without coverage. A semi-private room in a nursing room costs an average of $76,285 a year, an assisted living facility runs $40,200 and a year of part-time home care typically ranges from $18,000 to $25,000, according to the insurance association.
Q: What happens if you don't have it?
A: If your savings can't cover your expenses, you may have to take your chances with Medicaid, which covers nursing home care for older people with low incomes and limited assets. In most states, Medicaid also pays for some long-term care services at home and in the community. But choices for care through Medicaid will be limited. And qualifying for Medicaid may mean spending down your assets first.
Q: How does shared care work?
A: Instead of purchasing a future pool of benefits for each spouse, the policies are combined into a pool they can each use. So, buying a three-year shared care policy each gives a couple up to six years of benefits; each buying a five-year policy gives them 10.
If one spouse develops a need for extended long-term care, such as from Alzheimer's or a stroke, he or she could access most or all of the benefits. And if one dies without having used any coverage, the full benefits generally transfer to the surviving spouse.
Q: Does it cost extra?
A: Shared care costs more than separate policies with the same benefit period. But it can allow you to buy a shorter, less expensive policy, knowing that there ultimately is a larger combined pool of benefits to draw from.
For example, two typical three-year policies with the shared care rider will cost roughly 14 percent to 17 percent more than two separate three-year policies, according to Jesse Slome, the insurance association's executive director. But that could still be more cost-effective in the long run by ensuring that one of them can get as much as six years of coverage if needed _ double the length of the policy.
Q: So what's the typical overall cost?
A: Let's use as an example a 55-year-old couple in good health who purchase a fairly representative amount of insurance with a current value of about $200,000 _ or a $180 per-day benefit for three years each of future coverage including 3 percent compound inflation growth. They would pay an average yearly premium of $1,950 for two standard policies without shared care, according to Slome.
Attaching a shared-care rider would push the cost to $2,260. But it could save them money by ensuring that one can get five or six years of coverage if needed _ more than the length of the policy.
Couples over 60 or 65 will pay significantly more.
Q: Who is it best-suited for?
A: Shared care is best for couples who cannot afford lifetime coverage but want to be well-protected in the event of significant long-term care needs.
Eva Ng, 53, and her husband Robert Blanda, 62, of St. Paul, Minn., obtained comprehensive coverage this year that costs them $4,500 annually for the equivalent of 10 years of total combined benefits. They paid extra for shared care as well as indexing it for 5 percent compound inflation growth.
"We liked the idea that you can get double the amount of coverage with shared care," says Ng. "If anything happens and one of us has to go to a nursing home, that larger amount can cover more assets so we don't have to give up our home.
Q: Why are we hearing about shared care now?
A: Long-term insurance carriers are promoting it as an affordable alternative to the once-popular lifetime coverage option, which they're doing away with or making almost prohibitively expensive because of their expenses. When available, lifetime coverage policies cost roughly double the price of three-year policies, according to Claude Thau, a long-term care insurance expert and industry consultant in Overland Park, Kan.
Debra Newman, founder of Newman Long Term Care in Richfield, Minn., says she recommended unlimited coverage to her clients for years because it cost only about 25 percent more than limited-duration policies. Now she urges couples to get shared care instead.
"This gives them a way to hedge their bets in case something catastrophic happens to one of them," she says.
American Association for Long-Term Care Insurance http://www.aaltci.org
National Clearinghouse for Long-Term Care Information: http://www.longtermcare.gov
Personal Finance Writer Dave Carpenter can be reached at http://www.twitter.com/scribblerdave