Too many people aren’t receiving enough long-term care coverage for the premiums they’re paying. Some are paying twice what they should. It’s not surprising. Insurance is an inefficient market. It’s tough for consumers to find prices and other details, and it’s something they don’t want to do to begin with. So, when people buy LTCI, many of them go about it the wrong way.

Almost-identical LTCI policies are priced very differently, according to the American Association for Long-Term Care Insurance. In a recent study it found that the cost for similar policies for a 65-year-old couple varied from $3,815 annually to $7,129.

That’s not the only difference. Premium increases after the first year differ greatly among insurers. A few insurers double their premiums or something close to it over time, causing many insureds to either reduce other spending or drop coverage.

Don’t make the mistakes too many LTCI buyers do. Follow my guide to purchasing LTCI.

Don’t buy into the arguments that LTCI is disappearing. It’s true many insurers recently dropped out of the market. This is a normal consolidation in a relatively young industry. It’s being narrowed down to a few firms that have experience, volume, scope, and commitment to the sector. I expect they will continue to price their products and service their customers well. So, don’t let the recent turmoil among insurers deter you from seeking this financial protection if it’s appropriate for you.

Most people buy LTCI, and most other insurance, because they were contacted by or contacted one broker. They listened to an extended presentation and decided to buy or not buy that policy. Don’t be that person. Here’s how to buy LTCI.

• Decide the amount of coverage you want. For most people, LTCI is too expensive because they look at only “gold-plated” policies with maximum protection. Most of us can’t afford that level of coverage and should buy a policy for the most likely events and self-insure or seek other help if coverage beyond that is needed. Or you can decide from the start insurance will cover part of the expenses and your assets will pay the rest. In either case, you need to focus on these four key policy terms.
• Decide on the maximum length of coverage. Most insurers now don’t offer unlimited lifetime coverage. That’s fine, since few people need long-term care beyond five years. Most of us should opt for coverage in the two- to five-year range.
• Focus on the daily benefit. LTCI doesn’t cover all costs when you need care. It pays for or reimburses LTC expenses up to the policy’s daily maximum amount. Become familiar with the cost of LTC in the area where you’re most likely to receive care if it is needed. You can view a good survey of costs around the country at www.genworth.com. Then, decide if you want to pay for coverage for the average rate in that area or something else.
• Be sure you have inflation protection. LTC costs historically rise faster than consumer inflation, though it’s moderated some in recent years. Your policy won’t be worth much if you lock in coverage at today’s rates but don’t need care for 20 or 30 years. Each insurer offers several inflation protection formulas, and the cost of each is very different and has different benefits. Inflation protection is likely to be the most expensive variable in the policy. See how the different inflation features change the premium and choose the strongest inflation protection you can afford.
• Choose the elimination period, or deductible, you’ll cover before the policy kicks in. Usually this is 30, 60, or 90 days. You pay for all costs during that period.

Here’s how to put these factors together.

Suppose nursing home care costs $150 in your area, or about $55,000 annually. You decide you don’t want to pay more than a few months of that on your own. So, you elect a policy with a 60-day elimination period, meaning you pay for the first 60 days of LTC before the policy kicks in. You also decide the premium for $150 daily coverage is too high. You elect for $100 daily coverage for nursing home care and plan to pay additional costs, should you need coverage, from your assets and income.

Now, you’re ready to shop for a policy. Be sure to talk with several agents so that you’ll hear what’s offered from most of the major players in the market.

Here are a few more tips to find the best value.

• Don’t jump at the lowest premium. Traditionally insurers who aren’t experienced in LTCI offer the lowest premiums. They underprice their policies and eventually increase them significantly, deny a high percentage of claims, leave the market, or all of the above.
• Ask about the insurer’s claim approval history. An agent should make this available to you. If not, it’s available from your state insurance agency. You also can ask the agency about complaints against an insurer.
• Consider joint coverage for married couples, usually known as shared care. This is one policy with one maximum coverage limit that the two spouses can use in any ratio. The risk is that the first spouse to need LTC uses all or most the policy’s benefits. But a joint policy is substantially cheaper than two individual policies.
• Ask if a policy is under the Long-Term Care Partnership. About 40 states and 30 insurers participate in this federal-state program. It provides that to the extent you purchased LTCI you eventually can qualify for Medicaid after the policy is exhausted without depleting your estate first.

Normally you don’t qualify for Medicaid unless you have minimal assets and income. You have to spend down your estate before Medicaid takes over and pays for long-term care. But under the program your estate is protected to the extent of your LTCI coverage. If your policy’s maximum benefit was $300,000 and you used it up, $300,000 of your estate is protected and you qualify for Medicaid. Policies under the program have minimum coverage and inflation protection requirements, so one might not fit your needs. But if you were going to buy the policy anyway, buying a policy under the program is a free benefit to you and your heirs.