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Questioner: Dave

Question: Given the following scenario, would you advise the purchase of long term care insurance?

Husband age 58 Wife age 56. Son 10.

Household income $225,000. Financial assets (variety of mutual funds and CDs) $1.5 Million (excluding home owned free and clear worth apoproximately $600,000). Pensions (including Social security: at age 65 approximately $10,000 month.

Health of both husband and wife are good.

Would the family above be better served by potentially paying out of pocket for LTI or purchasing a policy? If purchase is recommended, at what age?

Answer: Dave, thanks for your question. Lets be simple about this. Long-Term care insurance is an insurance policy that is purchased over your lifetime so that if you and/or your wife would have the need for extended nursing home or home health care needs, the insurance would pay for this expense. Of course, for you to have the luxury of the insurance paying the care for you, you must pay for the insurance before you have the need for it.

The length of time for which you make premium payments on the policy are unknown to everyone. It is virtually impossible for anyone to know exactly when they will need it. However, it is my professional feeling that going forward and with the advancements of technology and medicine, that baby boomers will need some form of long-term care in the future. Again, impossible to know how much care, but some form will be needed. In addition, I do know this. It is expensive and could very rapidly deplete your savings if used for an extended period. I beleive that it has been found that the average amount of stay in a nursing facility is about 2.5 to 3 years. However, the stay in a facility for Alzheimer, strokes, etc. Is much, much longer. I myself have a client who has Alzheimer that has been at home using care for over 12 years. Although they have plenty of assets she had decided early on to purchase a LTC policy. It has been paying for over 12 years.

Since you have assets, the question is more of "do you want to self-insure and pay all the expenses" or "would you rather let someone else pay it" or a combination. That is all. If you feel that premiums are too high, well just structure it in a way in which you want to share the risk with the insurance company. It is up to you and very flexible. You are also at about the prime age for recommended purchase.

I hope this gives you a little guidance in your decision.

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