Do You Need Long Term Care Insurance?
It’s hard to contemplate your death, and the possible need for life insurance and estate planning, but it can be even more difficult to think about what you will do if you need help taking care of your needs. The AARP estimates that about half of the older population today will spend some time in a nursing home. And, with life expectancies increasing, it would not be surprising if many of us ended up needing some type of care, whether in a nursing home or through some other assisted living or home care arrangement.
Long term care (LTC) insurance policies are designed to help you meet these expenses. You pay premiums now, and your policy helps cover the costs of your long term care. It is important to carefully consider such policies, though, since there might be restrictions on what kind of care you receive and how long you will receive the care. Another consideration is that there might be a monthly or yearly cap on the amount the policy will pay toward your care once long term care becomes necessary.
Factors that Could Increase Your Need for LTC Insurance
Not everyone ends up needing long term care insurance, since it may not be necessary to go into a facility, or pay for care in the home. However, there are some situations that could lead to an increased need for LTC insurance. These include:
- Not having anyone to care for you at home. (Or not wanting to move in with children or relatives for care.)
- A history of longevity in the family.
- History of degenerative conditions (Parkinson’s, Alzheimer’s, etc.) in the family.
- History of stroke, chronic health problems, heart attack and other conditions that might warrant long term care through deteriorating health.
- Your own health history is one that could lead you to need help in later years.
The problem, of course, is that even if all of the above conspire against you, you still might not need long term care. Another consideration is that advances in health care might make your LTC policy obsolete by the time you need it. Those are the pitfalls of any insurance policy: You don’t really know if you will need it, but you buy it in case you do end up needing it.
Many people wait until their 40s or 50s to decide whether or not to buy long term care insurance. This might provide you with a little better idea of whether or not you will need it. There is a fine line, though. If you wait too long, it will cost more.
Alternatives to Long Term Care Insurance
If you don’t want to purchase long term care insurance, you can plan now to offset a possible need for it. Include the possibility of a long term care arrangement in your retirement planning. You can estimate how much it would cost to keep you in long term care (usually between $4,000 and $11,000 a month, depending on your needs), and work toward saving up for that. Other options including selling your home when the time comes to fund your long term care — but you will have to have your mortgage paid off in order for it to work.
You can also buy an immediate annuity with a chunk of your retirement account (if it is large enough) or with the proceeds from your home’s sale. You will need to be careful, though, since annuities come with their own pitfalls.
You need to think about your future, and the likelihood that you will need to pay for long term care at some point during your life. Begin now to make preparations, whether you buy long term care insurance, or find some other way to provide for your care. A financial adviser can help you run the numbers and figure out what you need.
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