Long Term Health Care Insurance Facts

Long term health care insurance should be thought of as retirement insurance. With seven out of ten couples having a long term care need during their marriage in no short order one of the spouses can find themselves bankrupt. Usually it’s the woman. In fact, one out of two women will have a long term care need in their lifetime.

A major consideration to make regarding long term care insurance is how much money you have at risk. Remember, this is your retirement and lifestyle we’re talking about. Also, who much would you personally have to pay for care should you (or your spouse ever need it). With care costs and nursing home costs at $70,000 as an average in 2008 it doesn’t take long to go through money.

If you have several million dollars earning interest then you may be comfortable self-insuring (i.e., paying the costs yourself). Then again, you may want to leave every penny to your heirs. Transferring the risk to an insurance company does two things for you. When you buy long term care insurance you insure your retirement savings against the enormously high cost of health care and you insure your retirement lifestyle.

The idea of long term care insurance is to insulate and protect your retirement savings, retirement lifestyle and provide inheritance to your children or family.

Some advisors say if you have a lot of money then why even buy long term care insurance just “self insure”. Self-insuring can work for some but for the many who fall into the $500,000 to $1.5 – $2 million self insuring could present even more risk.

Let’s take a real example. Let’s say you have 750,000 as your entire nest egg. That equates to a risk to liquidity ratio of 10 years. At the current 2008 costs of $70,000 a month for nursing home care given a long term care need – in 10 years your $750,000 would be lost to long term care costs. Actually that money could deplete even sooner if you’re married and paying both long term care costs and living expenses for yourself.

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This entry was posted on Monday, June 8th, 2009 at 7:04 pm and is filed under Health care insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.