Should I buy long term care insurance

If you can’t take care of yourself when you’re old, there are plenty of resources from which to choose: home-health services, adult day-care centers, assisted-living facilities, or nursing homes. Finding the money to pay for such help, however, presents a dilemma.

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Q: Joe, my wife and I have been hearing about Long Term Care Insurance and wondering if we should buy it, but we just don’t know much about it. Can you help us out with some basics of what exactly this insurance is and what factors to consider before buying it?

A: Long Term Care Insurance (LTCI) is for anyone who has assets they want to protect should extended nursing care occur. Because the projected cost of nursing home care for the year 2020 is $175,000 annually, very few people are able to cash flow such costs, thus the need for the insurance. As you might expect, LTCI is not inexpensive. The following tips should help deciding if you should buy long term care insurance.

Wait until you are 60 years old.

The younger you are when you take out the policy, the lower your premium will be. However, it is very rare for anyone under 60 to need nursing home care, so don’t pay for coverage you don’t need. On the other hand, the longer you wait, the higher your premium will be so don’t procrastinate once you reach 60.

Buy the inflation rider.

Yes, your premium will increase substantially, but the coverage you buy today may not be needed for years. Assuming 5% inflation, monthly care expense of $4500 will escalate to over $12,000 in twenty years. Inflation is reality. Plan for it.

Save by increasing the elimination period.

hould we buy long-term care insurance? The insurance industry would say "yes," as would many folks who need or provide long-term care services.

photo credit: Basil Gloo

With LTCI, your deductible (called elimination period) is defined as the number of days you pay out of pocket before the policy starts paying. Longer elimination period means lower premium, so keep a big emergency fund, opt for longer elimination period and save on your premiums.

Understand what you are buying.

Never buy anything you don’t understand. Because Long Term Care Insurance has so many variables and options, it is not easily understood. If the agent does not clearly explain the policy and take time to answer ALL of your questions, walk out.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Securities offered through LPL Financial, Member FINRA/SIPC