How to Decide Whether to Buy Long Term Care Insurance

If you need care for longer than health insurance and Medicare will cover, you must either pay yourself out of income, savings, retirement funds, or you can apply for Medicaid, the state welfare health care program. Medicaid consists of three parts: 1. Eligibility, 2. Share of cost, 3. Recovery.

Medicaid looks at your income and your assets. To qualify for Medicaid benefits to pay for long term care the applicant must meet certain criteria like have property that does not exceed the Medicaid property limits. To learn about these limits visit guidetolongtermcare.com/whopays.html

The first decision to make is whether or not you are going to continue to self-insure or transfer the risk to an insurance company.

People will ask "can I get nursing care at home?" ... of course... people like Bill Gates aren't going to go to a nursing home, he'll build his own hospital. The common reason people leave home and go to an assisted living facility or a nursing home is that they cannot afford that level of care at home. You can get any kind of care anywhere you need it as long as you can pay for it.

Let's look at the actual cost since according to the Government Accounting Office there is a 60% chance you will need long term care in your life with an average of 3 years of care at $72,000 per year.

Being self-insured today here is what your out-of-pocket long term care cost (premium) is per person at todays cost. (national average)
Daily: $200
Monthly: $6,000
Yearly: $72,000
(average care of 3 years = $216,000)

By self-insuring you will pay above. Compared to a LTC insurance premium below.

Daily: $10 (your age and benefits may show different premium)
Monthly: $300
Yearly: $3,600
(if you pay-in 20 years before using benefits = $72,000 (unless it's used before))

At todays cost you will spend over $200,000 for long term care, but factoring in that the cost of care will double in 14.5 years it will be somewhere between the cost today and if you need care in 14.5 years it will be $144,000 x 3 = $432,000.

So if you are willing to self-insure be ready for as much as $500,000 per person.

As shown above, for an average of $3,600 a year you can insure for the $432,000 because the policy has built-in inflation protection. Where will the money come from to pay the long term care bill? There no other insurance that will cover this cost.

There is nothing wrong with self-insuring if you are willing to assume the risk. But why would you insure your home, car, and health which have a less likelyhood of being a catastrophic event than long term care?

Other than self-insuring and welfare lets look other ways to pay for your long term care:
1) Traditional long term care insurance - the least amount out of pocket for the largest return, but has no cash value. You'll need to find if you can qualify to buy long term care insurance, because not everyone qualifies. Don't assume you will be insured and don't assume you won't. Companies are always changing their underwriting guidelines (for new applicants-once insured they have to renew your policy regardless of changes in your health).
2) Universal life insurance with a long term care rider, which does require underwriting like traditional LTC insurance but it has cash value, a good option for those who already have this kind of insurance they can exchange their for one with a LTC rider.
3) Annuity with a LTC rider which is great for those who cannot health-qualify for 1 or 2 because no health underwriting is required.

Your choice today is the choice you and your family may have to live with. The reason is that health changes suddenly, as do accidents happen, and if you needed care tomorrow you would be stuck with paying yourself or welfare.

Whether you insure or not is a matter of whether you are OK with the consequences if you needed care and didn't have insurance. That's how you decide.

* The best age to insure: the age your health will still insure you.
* The best benefits to get: enough to cover what you cannot afford to pay.
* The best company to insure with: John Hancock, MetLife, Genworth, Prudential
* The best resource for long term care information: www.guidetolongtermcare.com
* The best resource for elder law attorney's: www.naela.com