Long term care insurance: Who needs it anyway?

Long-term care insurance is a gamble, as is the case with most insurance. If you end up needing years of supervision and care, then long-term care insurance was a good buy. If you die suddenly, never using any sort of personal or nursing care, than it was a waste of money. And you always need to remember, that no policy covers all of the cost. There will always still be some bills to pay even with long-term care insurance.

As you or your loved ones begin to consider long-term care insurance, you should beware of pushy salespeople and scare tactics. The costs are high and the fear is great, so make sure not to buy in a panic. Many people simply should not bother with purchasing long-term care insurance. Agents get enormous commissions (often 50% of the first year's premium and another 10% for every year after that) so they have plenty of incentive to sell these policies. You need to think long and hard before considering this as a worthwhile investment.

Long-term care insurance helps to protect assets and preserve the inheritance for heirs. However, it's very expensive and never covers the full cost of care. So, who are some of the individuals who should consider buying a long-term care insurance policy?

Individuals with ample assets. The primary reason to buy long-term care insurance is the protection of an individual's assets in excess of the cost of long-term care. If your parent or loved one is believed to become eligible for Medicaid within approximately 12 to 18 months of entering a nursing home, you should probably not consider this as a viable investment. Nursing home costs vary significantly from area to area, so you should look at the cost within your specific area. Just as a rough guideline, you may consider long-term care insurance if your parent has at least $100,000 in assets (not including his house and personal belongings).

Those with ample income. If your parent can afford $300-$600 per month in premiums without affecting their lifestyle, they may consider long-term care insurance. Some experts have suggested that this type of coverage should not cost more than 5% of a person's total income, which may be a pretty good guideline to follow. Also, will they be able to continue paying the long-term care insurance premiums if they rise or if your parent's income falls. You need to keep in mind, if your parent fails to pay premiums, their policy will be canceled; so they should not even start this type of coverage unless they plan to continue it.

Those whose assets and income are not overly ample. People with a large income or more than $1 million in savings, generally don't need long-term care insurance as they will be able to pay for their care out of pocket. However, they might still want it in order to protect their assets for heirs or perhaps just for little peace of mind.

Continued on Page #2

Some information from How to Care for Aging Parents by Virginia Morris

Additional information and web page by Paul Susic M.A. Licensed Psychologist Ph.D. Candidate Clinical Director- Senior Care Psychological Consulting