Long Term Care Insurance - Probably not for youJun 17
Long term care insurance is a hotly debated solution to a very expensive problem. Alan Roth posted an excellent piece about it in his blog. In short, he's generally not a fan of using insurance to protect against the risk of long term care costs.
And I agree with his thoughts. Except I HAVE the coverage. I bought it 15 years ago when I was a 30-year-old single parent and my motivation was more emotional than financial - I didn't want to be in a position to have to ask my son to help me go to the bathroom or feed me if I had some horrific accident. The premiums have gone up once in the last 15 years - from about $800/year to $1,100 per year and my policy has a $330 daily benefit, inflation rider, 90-day elimination period and lifetime coverage. The insurer, if you're curious, is State Farm. Note that I drank the Kool-Aid there for 14 years as an employee and still love the company to a depth that is hard to explain.
How you should address the potential cost of a long term care stay depends on your goals, income, net worth and willingness to take a chance that your insurer may not be able to pay your claims should you actually use the coverage.
That last piece is critical since there are some very appealing offers available from some not so appealing companies. If you are seriously considering purchasing a policy PLEASE check their Weiss ratings. Weiss has the toughest reputation and they charge for access to their data so ask the insurance company to provide this for you.
But, to Alan's point, self-insuring is perhaps the least risky route IF you can afford it. The only client that is likely to be a good candidate for insurance is one who absolutely does not want to be in a Medicaid facility AND has the income and/or the net worth to cover the premiums.
If I had to make the decision again today, I'd still be tempted to buy the coverage if only to avoid having a well-meaning relative attempt to care for me when I'm helpless. I'll take a paid stranger any day.