The Pros and Cons of Long-Term Care Insurance

Do you have long-term care insurance? SHOULD you have long-term care insurance? These are questions that currently plague many forty-, fifty-, and sixty-somethings, as well as some precocious thirty-somethings. We’ve been hearing and reading more and more about long-term care insurance in recent years, but we still don’t seem to have any kind of firm consensus about whether it’s a good investment—whether it’s a necessary investment—or not.

This recent article from CBS online, entitled Why Long-Term Care Insurance Is Important, argues that “LTCI is a tool that can help preserve and protect financial assets, provide flexibility to choose the type of care, offer the ability to choose where care is received, help to ensure high-quality care, and provide financial and emotional support for the family.” This article helps readers not only understand why LTCI might be important, but what are the important questions to ask when considering whether and which long-term care insurance might benefit you and your family.

Of course, not everyone thinks long-term care insurance is necessary. Another article, this one from the Wall Street Journal, provides both sides of the argument. The pro-LTCI writer argues that “For those who buy and keep their policy it is a no-regret proposition. No one who has paid premiums and receives their benefits from the policy regrets having paid those premiums.” You pay a small regular sum over the course of a few decades, and when the time comes you are saved from bankrupting your family by paying as much as $250 a day, often for months or more.

The opposition writer against long-term care insurance argues that the likelihood that you’ll need to use the insurance policy is exaggerated. “It may be more useful to learn that 67% to 70% of seniors who do go into a nursing home are discharged within 90 days, and that after two years, less than 6% of those admitted will still be there.” This is important information to have, but $250/day for even 30-60 days can quickly wipe out a significant portion of a retiree’s savings.

Whatever you choose, make sure you account for your decision in your retirement and estate plans. Talk about the decisions with your estate planner, your financial advisor, and especially with your children. Long-term care expenses can be significant, and it’s always best to be as prepared as you can possibly be.