Should You Buy Long-Term Care Insurance?

According to LongTermCare.gov, nearly 70% of those age 65 and over will require long-term care at some point in their lives. This includes care at home (paid and unpaid) as well as at nursing and assisted living facilities.¹ On average, a person who requires this care will receive 2 years of it at home, and 1 year of it at a facility.

Because this kind of care is expensive—especially for more intensive care around-the-clock—and it is not covered by Medicare, it can pose a significant risk to retirement savings. 

You can purchase long-term care insurance to shield yourself against this risk. But the premiums for this type of coverage are not cheap.

Angelica Leichyt, senior editor for CBS's Moneywatch: Managing Your Money, weighs the pros and cons of purchasing this kind of insurance.²

First, some of the advantages:

• Financial Security - Whether the long-term care occurs in a nursing home, assisted living facility, or in-home, long-term care insurance ensures that the financial burden is mitigated.
• Inflation Protection - The price of healthcare will continue to go up. You can get a policy that ensures coverage despite future cost increases.
• Potential Tax Benefits - In some cases, long-term care premiums may be tax deductible. (Consult your tax professional for specifics.) 

And now some of the drawbacks:

• Cost of Premiums - Long-term care insurance premiums are expensive, especially if your coverage includes special options. And to reap any benefit, you must continue to pay them.
• Qualifying Limitations - Some people may find it hard to qualify for long-term insurance. For example, those with certain pre-existing health conditions.
• Opportunity Cost - Because premiums are significant, you need to ask whether you might be better off investing that money instead. 

Nearly a third of people will not require long-term care at all. And others may need it for only a short period of time. However, if you need this kind of care for several years, and don't have long-term coverage, you could see your savings quickly dwindle.

When it comes to making a decision about this kind of coverage, Leicht urges people to first inform themselves and then do a comprehensive analysis of the pros and cons for their specific situation.

 

1. http://go.pardot.com/e/91522/ds-how-much-care-will-you-need/95227m/2316240219/h/SeHdiFU69YFG-7c81yTWX4bFBH0S6A8PMV_QulS6hXU
2. http://go.pardot.com/e/91522/g-term-care-insurance-in-2024-/95227q/2316240219/h/SeHdiFU69YFG-7c81yTWX4bFBH0S6A8PMV_QulS6hXU