One of the most difficult decisions in long-term care planning is whether to purchase long-term care insurance and which of the wide variety of products to purchase. On the one hand, insurance premiums are high and they may be raised in the future if you are purchasing policies in your 50s and 60s and the need is probably many decades in the future. On the other, many people are saved by their long-term care policy and can choose their own care setting rather than rely on what is covered by Medicaid in their state.
Here are 4 tips that should help you make the decision whether to purchase long-term care insurance and what products to consider:
Can you afford long-term care insurance? Can you “self-insure”?
There are a few rules of thumb that can help determine whether you are in the target market for long-term care insurance. You need to have enough savings and income to afford the premiums but not so much that you can easily pay your costs of care. If you are a couple whose net worth is more than $1 million but less than $3 million, or a single person with half these amounts, you are a candidate for long-term care insurance. You could also look at this from the point of view of income. If you can pay the premiums without affecting your style of living or dipping into savings, then you can afford long-term care insurance.
Decide now once and for all.
Unless your financial situation is likely to change in the future, the best time to purchase long-term care insurance is now. Every year you wait, you will face higher premiums and run the risk that a health care event will make you ineligible.
Assess your own feelings.
First, if you or your spouse were to need care at home, would you be reasonably comfortable using up some of your savings to pay for care? Or would you exhaust yourself providing the care yourself? Would you feel worse having paid premiums over the years for insurance you did not use or paying out-of-pocket for care that could have been covered by insurance?
Use a long-term care insurance specialist.
Long-term care insurance is one of the most complicated insurance products available with policies offering a variety of benefit levels and conditions for payment. Some insurance companies have raised premium rates on existing policies while others have not. Some honor claims readily and others have put up difficult roadblocks. And there is a proliferation of hybrid policies that merge long-term care insurance with life insurance. You need someone who specializes in the field to guide you through these options.
While these tips won’t eliminate the difficult decision that all baby boomers face, these tips should give you food for thought.