About retirement, author Stella Rheingold said, "Congratulations on making it over all the hurdles and reaching that wonderful time of life where you get to do whatever you want." If only the retirement years were really that magical. Retirees today have their fair share of worries -- including the problem of managing unexpected healthcare expenses.

Planning for healthcare costs can be daunting. According to a 2019 Genworth study, monthly costs for long-term care range from $4,385 for a home health aide up to $8,517 for a private room in a nursing home. Few people have the resources to budget for those kinds of expenses.

So, what are the alternatives? Cross your fingers and hope you don't need long-term care, or buy long-term care insurance. Unfortunately, long-term care policies are complicated and expensive. Make sure you're positioned to make the right decision by asking these four questions. 

Senior man talking to doctor

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1. Do I need long-term care insurance?

In truth, not everyone should buy a long-term care policy. Two factors largely determine if this type of insurance is suitable for you: how wealthy you are and your family's history of disease.

Your wealth

You can be too rich or too poor for long-term care insurance. Say you have money in your retirement accounts to the tune of $2 million or more. You do have the means to fund some of your own healthcare expenses. The average length of stay in a nursing home is less than two and a half years, which equates to about $250,000. While that's not chump change, you can likely afford to absorb those costs.

The picture looks different if you have less than $150,000 in assets. Yes, a two-year stint in the nursing home would wipe you out -- if you had to pay for it out of pocket. But you can tap Medicaid for assistance. And that may be preferable to paying out long-term care insurance premiums of $2,000 to $3,000 annually for 20 years.

But what if you are in that middle range, with assets between $150,000 and $2 million? You can afford the premiums, but it would be tough to absorb the costs of an extended stay in a nursing home. That's the scenario in which long-term care insurance makes the most sense.

Family history of disease

Up to 43% of long-term care insurance claims are related to Alzheimer's. Strokes, cancer, diabetes, and circulatory issues are other common reasons someone might need extended care.

Take a look at your family history of disease. If your people tend to live strong and rarely suffer from degenerative or dementia-related conditions, your risk of needing long-term care is much lower.

2. Is now the right time to buy long-term care insurance?

Ideally, you should buy long-term care insurance when you're in your 50s. If wait until after your 60th birthday, it may be harder to find coverage and it will definitely be more expensive. Your premium will be lowest if you purchase a policy before you turn 50, but you then you're committed to an extra 10 years or more of premium payments. That often doesn't work out in your favor.

3. What does long-term insurance actually cover?

Covered services vary by policy, but they commonly include things like nursing home stays, assisted living, in-home care, and adult day care services. Most policies offer a maximum daily benefit for these services, with limits on duration of coverage and/or total dollar amount. That means you might see a policy that pays out a maximum of $100 daily for qualified services, for up to three years.

Chances are, that $100 doesn't mean much. Spend an hour calling around facilities and services in your area so know what the costs are locally. That way you have a baseline for evaluating coverage levels. 

Read the policy's fine print very carefully, too. Some policies have different daily caps for different types of services. And all policies will state what conditions need to be met before you can receive any benefits at all. Usually this involves your ability to perform activities of daily living (ADLs) independently. And know, too, that your benefits don't usually begin on day one of your nursing home stay. Typically, the first 90 days are excluded. Be on the lookout for others exclusions as well. Every insurance policy has a list of exclusions and you don't want these to catch you off-guard.

4. What happens if I don't use the insurance?

If you spend $2,000 per year for 20 years on a long-term care policy, you've invested $40,000 in that protection. Traditional long-term care policies don't offer any way for your family to recoup those costs if you don't use your benefits. It works like home insurance -- you pay in without the expectation of getting anything back.

You can purchase a hybrid long-term care/life insurance policy. This coverage provides a pool of funds that can be used for long-term care or as a death benefit. It comes at a cost, however. According to the American Association of Long-Term Care Insurance, the average total premium of a hybrid policy is $75,000.

Weigh your options carefully

Long-term care insurance is not a magical solution for rising healthcare costs, though it may help you protect your assets. If you decide you need a long-term care policy, know approximate costs of healthcare in your area, comparison shop, and always read the fine print.