Should You Buy Long Term Care?

Q: How do I evaluate long term care insurance for myself and my spouse?  We’re both 45.  I heard it’s better to buy it when you’re young.

A: With the way the winds of change are blowing, it probably is a good idea to look into buying long term care insurance now vs. waiting.  Why?

  1. The price of long term care (LTC) has been increasing dramatically, a trend expected to continue for the foreseeable future.  Depending on the extent of the care needed, even individuals with substantial assets may have trouble covering these costs on their own.
  2. The price of LTC insurance is also expected to continue trending upward.
  3. The older you are when you purchase LTC insurance, the higher your annual premium will be.  (On the other hand, of course, you will end up paying for fewer years if you start later.)
  4. The longer you wait, the greater the risk you will contract a health problem that may make you uninsurable (or drive the cost so high it will be prohibitive.)
  5. Federal and state governments are taking steps to close loopholes on LTC expenses they might have covered in the past.

On the other hand, at age 45, you may have many competing demands on your cash flow (saving for retirement, funding college, mortgage payments, etc.) and you will need to weigh your ability to cover all of these simultaneously.  Your goal should be to select a policy whose premiums you are confident you will be able to continue paying over the long term.  Otherwise, if you let the policy lapse and you aren’t covered at the point when you need to be, it truly will be money down the drain.  In that case, you would have been better off saving the money instead.

If you can’t afford the Cadillac of LTC policies, you might still consider purchasing a policy with fewer bells and whistles to at least mitigate some of your risk.  The Kiplinger’s article “A Fresh Look at Long Term Care” outlines some of the possibilities.

In the end, the decision as to whether to purchase LTC insurance is one best made in the context of your overall personal financial plan. The choice of which policy with what features and benefits requires the guidance of a LTC insurance specialist. Please don’t hesitate to get in touch if you’d like to explore this further.

About the author

Sherrill St. Germain, CFP®

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