Cook Wealth Management Group

Do You Need Long Term Care Insurance?

It’s difficult to think about not being able to care for yourself. Considering long term care insurance can be uncomfortable, and for some it may be unnecessary, but whether you buy a policy or decide to do without, long term care is a significant piece of your financial picture.

As stated in an AARP report1 published in 2005, “The lifetime probability of becoming disabled in at least two activities of daily living or of being cognitively impaired is 68% for people age 65 and older.”

Although over 8 million2 people now have long term care insurance, it still may not be right for you. The increase in policy holders over the last decade can be attributed to heightened knowledge of the advantages of long term care, as well as more policy flexibility – fewer restrictions on in-home care mean you can now get more for your money.

Of course you can’t be certain of what you’ll need in twenty years…

How to Decide

Long term care can be a wasted expense or a real life saver. Here are a few things to consider:

Think about your family history – did your grandparents and parents live long? Did they develop Alzheimer’s and require additional medical care?3

Think about your financial situation – present and future – can your savings/retirement accounts sustain a hefty medical expense?

Think about the expected cost of care (along with the unknowns of healthcare reform3) – nursing home fees are pricey and will rise each year – can you live off your retirement even if your care is more expensive than anticipated?

Think about your spouse – do you want to leave your untouched assets to him/her, or will you dip into your assets to pay for your medical care?

Think about your children – can they handle the responsibility of caring for you? Do you want them to?

None of these questions are easy to answer. Your financial advisor can help you sort through the what-ifs.

How to Choose an Insurer

Ask your advisor to suggest insurance companies he or she has worked with before and that have been around for 10+ years. If they’ve been offering long term care for a decade, they have experience with claims.2

How to Choose a Policy

Unlike health insurance, long term care insurance covers only up to the benefit level chosen, typically by daily maximum.3 Your financial advisor can help you decide on a specific daily amount based on your potential needs and overall retirement strategy.

Your policy should be customized to your unique situation and the premium should be feasible. However, as with other forms of insurance, the lowest payment often means little coverage and lots of loopholes. There are ways to minimize cost (a 90 day “elimination period” is a great choice to lower premiums, passing on inflation protection is not2) while still getting the full advantage of the insurance.

Remember, choices about your long term care should be made carefully and with the help of an advisor who is familiar with your entire financial picture, not just a piece or two.

For informational purposes only. Please consult your advisor before making any insurance-related decisions.
1Beyond 50: A Report to the Nation on Independent Living and Disability, 2003. AARP.  Jan 11, 2005.
2 Pros and Cons of Long Term Care Insurance. Megan Johnson. US News & World Report. Dec. 21, 2009.
3Your toughest retirement puzzle. Lisa Gibbs. CNN Money Magazine. Apr. 7, 2010.