Long term care insurance is becoming increasingly popular as insurance agents press it, seeing an opportunity to sell a new product in a tough economic environment. With so many people either beyond or nearing retirement age, the audience for the product is also growing fast. With opinions galore it is tough to sort through everything to find out if it is a good buy for you or your loved one. How can you decide?
Whether it is desired or not, many Americans will spend at least some time in a long term care facility, whether by choice or out of need.
The cost of good care is only rising. Even though the supply of long term care beds is growing, the price will likely increase with the rest of medical expenses even as government attempts (we think) to implement some sort of controls. It would seem to make long term care insurance a good, if pricey, buy. As with many things, though, things aren’t always as they seem.
In looking at the decision regarding long term care insurance, the customer population falls into three broad categories: those who have little in the way of income and financial assets, those who have a great deal of income and/or financial assets, and those who fall in between. While the insurance is being marketed to everyone, only people in one of those categories probably ought to be giving it strong consideration.
Those with little in the way of finances probably don’t have a real option to purchase long term care insurance because limited financial resources are needed to meet current expenses. These are also the people who are candidates for government provided insurance to cover the cost of long term care, at least to the extent government will. This is a sizable portion of the population, which will put even greater pressure on government resources.
The portion of the population with significant financial assets probably are also not the best candidates for long term care insurance. Those who fit in this category have the resources to pay for the care they want without exhausting their bank accounts. They are likely to want more expensive and perhaps extensive care than is covered by the typical long term care policy. In addition, they are also more likely to stay at home and bring in caregivers, being able to afford whatever comforts they desire.
There is a big group of people who fall between those two categories who might want to consider long term care insurance. People with too much in the way of financial assets to qualify for government insurance but not enough to pay for their own care and still have left over what they need to meet other goals are prime candidates for the insurance. They might have enough to pay for a short stay but not enough to pay for a year or three, which is what the “typical” person might need. Long term care insurance for this group is as much as anything protection against being bankrupted by the need for care and becoming a financial burden on loved ones rather than being able to leave something in an estate.
We will have more on long term care insurance in future posts but hope this is helpful to you in your considerations or role as adviser to a senior. This is based on our observation and research but we recognize others may feel differently. Do you have other thoughts to share?