Do You Really Need Long-Term Care Insurance?

There's a rule of thumb among financial experts when it comes to insurance: do not over-insure yourself and insure only according to your needs. For example, if you're still young and need a lot of high payout investing to do, then take out a term life insurance policy instead of a whole life policy.

Which brings us to this point: when do you really need long-term care insurance?

Assessing your need for long-term care insurance primarily depends on where you are financially. If you have a low income, you may want to stay at a nursing home and have Medicaid pay for your costs. (Medicaid is both a federal and state program that is currently paying for nearly half of America's nursing home costs.)

But if you have a reasonably large estate and don't want old age cramping your style, then you might want to seriously consider talking to your insurance agent. However, do keep in mind that long term care insurance is not something you want to spend for, to the exclusion of all other items on your budget, because:

  • You have to pay high premiums
  • You might have to pay for increases in premiums
  • Some expenses you have to pay out-of-pocket
  • You lose benefits if you lapse on the policy and don't have non-forfeiture protection

In some cases, you might never need long-term care coverage - you might just die right away in a road accident. In any case, here are some factors to think about, to know if you may need long-term care insurance:

Your Family History

If your family has a history of chronic illnesses like heart disease, diabetes or Alzheimer's, especially if close relatives fell early.

Your Current Family Situation None of your immediate family members or relatives will be able to care of you.

Your Finances

According to the United Seniors Health Cooperative, a non-profit group based in Washington, DC, people should only think about long term care insurance IF they have:

  • At least $75,000 in savings
  • At least $35,000 in annual retirement income

What the figures indicate is that you should only think about taking out a long term care policy if you can afford it, and paying for the premiums will not cramp your current lifestyle. Otherwise, the best route to take is to have all your money earn interest, pay for professional care only on an as-needed basis, and if necessary, qualify for Medicaid.

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