Should You Buy Long-Term Care Insurance?
December 10th, 2011 | 
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If you’ve ever considered purchasing a long-term care insurance policy, you probably already know how expensive it is for that type of coverage. Then again, if you know how expensive it is to stay in a retirement community, you know that it will drain your savings very quickly if you have no coverage against it. It’s nearly impossible to know ahead of time whether you will need to stay in an assisted-living environment at some point in your life, so the decision of whether to buy long-term care insurance is a high-stakes gamble.
Of Americans that reach the age of 65, an estimated 45% will require some type of long-term care insurance in their lifetime, according to Milliman, an actuarial firm. This means that the odds are nearly even, but it’s slightly more probable that you will not need LTC insurance. If you have a debilitating condition like diabetes, severe arthritis, or obesity, the probability that you will need LTC goes up. Furthermore, medical technology continues to improve by leaps and bounds. It’s not unreasonable to think that by the time you’re elderly, medical technology will keep you alive but won’t return your youthful exuberance. Therefore, the percentage of Americans who require LTC will probably rise over time.
If LTC insurance was more affordable, it would be an easy choice to make. Traditional policies that pay a $150 daily benefit and adjust for inflation typically cost upward of $1000 per year. Fortunately, some insurers who offer long-term care coverage are coming up with ways to reduce premium costs. Here are a few things to remember when you’re shopping for LTC coverage:
1.) Don’t buy coverage unless you think you can afford a 10-20% increase in premiums later on. If you cannot make your payments, your coverage will be discontinued and whatever money you have paid already would be wasted.
2.) Save money by opting for a 90-day elimination period. This is similar to a deductible, but for LTC insurance. Your premiums will be lower, but if you need LTC in the future, you will have to pay for the first 90 days.
3.) Consider a policy that will cover a maximum of three or five years. 92% of policyholders with a three-year benefit period who file a claim for LTC do not use up their benefits. This may sound risky, but the premiums will be much lower and there is only a slight chance, statistically, that your benefit period will expire while you still need LTC.
4.) Consider a plan with a reduced daily benefit. You will pay lower premiums, but you will still need considerable savings to pay for LTC. This is a good half-measure for those on the fence. Some plans will pay based only on the services provided – not room and board. This is a viable option because your retirement plans probably already assume that you will have to pay a mortgage or rent every month.
5.) Choose an insurer that allows unlicensed caregivers. You don’t need a trained nurse for daily tasks like feeding and bathing, and unlicensed help costs much less.
If you follow these tips, you may find a long-term care insurance plan that’s affordable enough to be worthwhile. The risk of needing long-term care and having to pay for it entirely from personal savings is big, and will probably increase. Nobody can tell you with certainty whether or not you will need it, but if you do, you certainly would want to be covered.
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