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more to considerJan 28 '05 Write an essay on this topic.The Bottom Line Yes! Protect your standard of living. When considering long term care insurance, I've found the biggest mistake evolves around looking at statistics and using "averages". For instance, on average we will likely need about 2.5 years of care. People with assets or those that feel they are good savers then say that they can afford to pay for this expense themselves. This approach is extremely risky. Consider that on average, our house will not burn down. On average, our car will not get stolen. On average, our annual medical expenses will not exceed our health insurance premiums. See the problem with averages? You get insurance for financial protection against unexpected occurrences, not average occurrences. For those that feel they have sufficient assets to handle 2 or so years of care on their own, what if you ended up needing 4 or 5...or, as in many alzheimers situations, 7-10 years? Also, if you are married, what kind of standard of living would you subject your surviving spouse to if you took $500k out of your estate? Long term care insurance isn't for everyone, as very few products are...but it is wise to get for far more people than are getting it today. It is about insuring a standard of living and insuring against unlikely, but devastating situations. Some will say they will let Medicaid take care of them. First, in most states you have to spend your assets down to $2k. That's right, $2,000. Then, consider that a facility that accepts Medicaid will not be anywhere near the quality of facility that accepts private paid or insurance paid patients only. Also consider that most long term care covers all levels of care...in the home, assisted living, etc. Long Term Care insurance is all about maintaining a standard of living for both the person receiving care, and their spouse. For full disclosure sake, I do sell insurance, including long term care. I've advised some people that inquire that it isn't right for them, but those, by far, are the exception. Also, for full disclosure, I do not work on commission. I get paid a salary and am paid based on the quality of my advice, not whether or not someone purchased. Here is one last thing to consider if you have substantial assets. You typically can get a very affordable plan by taking more risk at the front end (which your estate can handle), and getting protection for your assets if the worst case strikes (which your estate may not be able to handle). For instance, you can take a 6 month or 1 year (or more) waiting period meaning there is no coverage during that time. By taking a long waiting period your premium drops dramatically. With that "savings" you then buy a long term plan, say 10 years of coverage or more. You now have insulated your estate against a worst case scenario. Isn't that the point of insurance? Insurance companies are beginning to see claims nearing $1m in total payout. While still in the minority, those families are very glad they have the protection. One final thought. If you are crunching numbers trying to figure out if this is right for you, don't forget to consider inflation. While on average the nationwide cost is less than $60k a year for skilled nursing care, consider that you are likely going to need at least 2-3 years of care and by the time you need it, costs may have doubled (at 5% inflation, things double in about 14 yrs). There is no investment I know of that, if I took my premium and invested it myself, would yield the benefits of a long term care policy. That investment may give me back a year or maybe two of care, but beyond that, I would be unprotected. As always, smart consumers shop around, and when it comes to insurance, should find salaried representatives that sell for more than one company so that they have the customers needs in mind and can provide a variety of options to best fit their needs. Also, I would not recommend buying from you financial planners. Nothing against planners, but many provide low cost "advice" and then make all their money on the products you buy from them. You should pay top dollar for the advice, then, to avoid conflict of interests, make it clear you will purchase any products they recommend from someone else. In summary: If under 50 be sure you have good disability insurance first....protect your income, then your assets. If over 50, buy long term care unless your net assets are currently $3-4M plus. For those with $1-$3m, get a policy designed with a long waiting period (1-2 years) and then get a lifetime policy limit (it pays regardless how long you need care). Now your millions are fully protected. If over 50 and have income around $40k and assets perhaps over $200k...then ltc insurance is probably right for you. Get a 4 year policy with about a 90 day waiting period. If you are single and don't plan on leaving assets to anyone, then likely you don't need this insurance...just keep in mind if you end up on Medicaid the level of care you may get may be far below the lifestyle to which you are accustomed.  |
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