Long Term Care Insurance

Should everyone buy Long term care?

No. The purpose, primarily, for long term care, is to protect an insured’s assets from being “spent down” and not leaving them to be available for retirement use by the insured or his/her family or for transferring to heirs. As a general rule, an insured should have $300,000 or more in investment assets to protect to be in the position to purchase long term care. If there is less than $300,000, then it is probably advisable to not purchase long term care insurance and take your chances with Medicaid as your backup.

Understand that under Medicaid you may not get to choose what facility you use, may have a roommate you do not want, and will receive the lowest priority of care.

Are all long term care policies the same?

No. Traditional long term care policies typically pay claims in a “reimbursement” manner; this means that the policy reimburses your long term care expenses up to the costs you actually had, up to your daily insured amount. If your care cost $60 a day and your policy insured you for $120 a day, you would still only receive $60 a day. A few companies offer long term care insurance that pay claims on an ‘indemnity” manner; this means that if you qualify for a claim, it pays the full daily amount regardless of what the actual expense was.

Isn’t Long term care insurance a waste because you receive nothing back if you have no claim?

Not necessarily. Traditional long term care insurance is like auto insurance and certainly has protection value. However, if you never have a claim, you receive no return from the insurance company other than peace of mind. However, there is a type of long term care insurance that is tied to a cash value life insurance policy that pays long term care benefits if you need them but if you don’t use them, it eventually pays a death benefit to your heirs. You get your money back.

I can’t afford long term care insurance now; I’ll get it later.

Long term care insurance premiums are priced at your age, and health. Once purchased, premiums cannot be increased due to age increases. The cost, if you wait, nearly doubles between age 50 and 65. The younger you are when you buy a policy the lower the life time annual cost.