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Jan 10th, 2020

Should You Buy Long Term Care Insurance?

It seems that everywhere you turn there is conflicting advice on whether Long Term Care Insurance makes sense.  This article covers several critical points that may help your decision of whether you should buy Long Term Care Insurance, and then when you should buy Long Term Care Insurance. There are lots of actors in this business and understanding their motivations can help you filter the advice they may be giving.

Long Term Care Insurance is NOT for you If…

  • You have assets over $2M* (We’ll cover more on that in a bit)
  • You have health issues that would disqualify you from coverage.

    • Sadly, insurance carriers are getting more selective each month.
  • You may have trouble paying premiums, or you’re on a modest fixed income with few assets.

Now that we have the dis-qualifiers out of the way, there are many Americans left in the “middle ground” where a Long Term Care Insurance plan may makes sense, but the amount of coverage and timing become important.

What Insurance Buying Advice Can You Trust?

Be on the lookout for heavily biased advice on whether you should buy Long Term Care Insurance.  There are many “advocacy” groups out there that pose as innocent organizations when, in reality, there is a bias propelling the organization.  While we are a brokerage, and naturally support Long Term Care planning, the purpose of this article is to uncover the unstatated biases out there.

  • Consumer Reports – a trusted resource for advice.  It’s been many years since Consumer Reports published an advice article on Long Term Care Insurance and things have changed a lot in the industry.  Read more about Consumer Reports’ advice on Long Term Care Insurance, and then our take.
  • Radio Pundits – there are several radio financial gurus including Dave Ramsey, Clark HowardRic Edelmanand Bob Brinker who are on record with Long Term Care Insurance advice.  The main issue with following their advice is that a “one size fits all” approach seldom works for a specific person.  While Dave Ramsey’s average listener should wait until 60 to buy (Dave’s advice) you may be in a completely different situation.

    • Most financial guru’s do advise their followers to consider Long Term Care Insurance.
  • Investment & Financial organizations – many financial services companies offer competing products, and want your money in their managed accounts.  This earns them a commission, and hence they are anti-Long Term Care Insurance.  If you have several million dollars, their products may be a better fit.
  • Your state government - Most states have a Long Term Care Partnership program which may offer additional asset protection.   States are even sending letters out touting the merits of Long Term Care Insurance.

At What Point Should You Self Insure?

The risk of needing Long Term Care must be tempered with the risk of never needing Long Term Care and purchasing a policy you may never use.  A common question asked is at what point should they self-insure the risk?  The conventional wisdom is that clients with easily-liquidatable assets such as investments with no withdrawal penalties or CDS totaling 2,000,000 or more should probably self-insure.  There’s a hybrid approach that many in the 750k – 2M range use where a smaller, more supplemental policy is purchased.  There are also hybrid LTC policies that combine life and long term care benefits.

One mistake many make is in figuring liquid assets versus hard assets.  You may have a home worth 750,000 but you don’t want to have to sell it to pay for Long Term Care when that time comes because timing the market can be disastrous.  Similarly, stock funds can be dangerous to rely on as they fluctuate with the market.  Imagine needing to sell stocks in March of 2009 when the S&P was at 666 (less than half its worth just a year before).

Long Term Care Insurance Advice For Your Individual Situation

Beware of One Size Fits All Advice

Don’t underestimate the advice of a financial planner, but consider the whole picture and take their advice in context.  The vast majority of “financial advisers” are working on your fees plus commissions on products they recommend.  If you are with most of the national financial planning organizations, you are paying commissions when you buy many of their recommendations.  A “fee only” adviser is not interested in selling you anything and generally can only make general recommendations.  Have someone like this evaluate your need if unsure.

The Next Step in Discovering Personal Need: Get Pricing

Before you can effectively evaluate your own personal Long Term Care Insurance need, you need to know the costs of coverage.  We provide an across-the-board birds-eye view of most major insurance carriers’ pricing and financial ratings at no cost.  We can e-mail this to you quite quickly using our proprietary technology.  If you’d like advice and quotes wrapped up in one package, request a quote by clicking below.

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