Deciding whether to buy Long Term Care Insurance

As I discussed in my blog post of May 15, 2014 long term care insurance is one of the three ways to plan ahead for long term care costs that I am comfortable recommending to people.

Generally, my clients do not have long term care insurance when they come to me.  That’s not surprising.  Long term care insurance is a relatively new product.

If you worry about the costs of long term care, then you should consider buying long term care insurance. (It should cost you nothing to get quote for a policy.) If concerns about the costs of long term care don’t worry you, then don’t buy the insurance.

Let’s be clear what long term care insurance does.  Like auto insurance, long term care insurance protects your savings against certain costs that may arise in your life.  The liability portion of your auto policy pays when you hurt someone or damage their property while driving your car, but the insurance isn’t protecting that other person.  Your insurance is protecting you.  That person you hurt is going to get repaid for what you did.  In the absence of liability insurance, you’ll have to pay out of your savings.  As a result, your liability insurance is protecting nothing but your savings.

Similarly, long term care insurance protects your savings.  The insurance protects your savings against the costs of long term care.  If you are like most people, long term care will be needed only later in life.  If so, then, to some extent, long term care insurance protects your heirs’ inheritance.

What will long term care insurance cost?

The cost of long term care insurance can vary widely from person to person.  Like an application for whole life (or other cash-value) insurance, an application for long term care insurance triggers an examination of the applicant’s health.   A review of an applicant’s health gives the insurance company broad latitude to exercise its judgment on the risk that an applicant poses.   The exercise of such judgment results in wide cost variations.

As a rule of thumb, however, for a person with no known health issues, I have seen the annual cost of long term care insurance to be roughly equal to the cost of one month in a nursing home.  At this time, nursing homes in northeast Ohio cost upwards of $6500 per month. (I’ve seen policies a bit more expensive, and I’ve seen policies much cheaper. Like I said, it’s just a rule of thumb.)

Note:  Long term care insurance policies are not limited to nursing home costs.  Many or even most policies cover long term care costs provided at the insured’s home or at an assisted living facility in addition to nursing home costs.  I use nursing home costs and time in a nursing home as comparative measures for long term care insurance because nursing home costs are the highest of usual long term care costs.

Bottom Line

If concerns about the costs of long term care cause you to lose sleep, then look into long term care insurance.  If the potential costs of long term care don’t cause you to lose sleep, then don’t buy long term care insurance.

 

For more information, visit Jim’s website.

Jim Koewler’s mission is
“Protecting Seniors and People with Special Needs.”

For help with long term care or with planning for someone with special needs,
call Jim, or contact him through his website.

© 2014 The Koewler Law Firm.  All rights reserved.

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