It’s probably the worst investment you can make. You hope you never collect a dime on it, and it’s expensive. In fact, it’s not actually an investment at all.
Long Term Care insurance (LTCi) is pure insurance, like term life insurance. It won’t make you any money unless you use it. With term life insurance you only collect if you die, and then you don’t get anything as you are dead, it goes to the named beneficiary. Everyone will die, but very few term life insurance policies ever pay out.
The reason is that we purchase this insurance to cover a specific time period, such as the 20 or 30 years that we owe a mortgage payment or some other fixed period. This is often at younger ages, when few people die, and thus it is inexpensive.
LTCi on the other hand is used to pay for our Long Term Care, which the Federal Health and Human Services Department says 70% of us will need. Thus there is a way larger chance we will use it than most term life insurance.
LTCi typically pays out much more money than most term life insurance policies. A $120 per day LTCi benefit today which includes the all important 5% automatic inflation provision, will allow you to collect $2,380.968 if you need 10 years of care 30 years later.
Thus, LTCi is pure insurance protection against a catastrophic loss, just like term life insurance. More claims are paid out from LTCi than term life insurance, and they are far larger.
Long Term Care is commonly needed (70% according to HHS) and is a catastrophic loss often causing us to spend down to impoverishment and end up on government welfare (Medicaid). The rough equivalent with term life insurance is the breadwinner of a family dying, leaving the remaining partner with children, mortgage and far less income.
In each case, preparation ahead of time is absolutely necessary, buy the term insurance while healthy and still alive, and the LTCi while healthy and still alive. Waiting to purchase either one is like driving that new car for a few months or years without auto insurance before making the purchase.
There are a number of things that can make the purchase of LTCi impossible. Stroke, diabetes, arthritis, Alzheimer’s, overweight, underweight, atrial fibrilation, COPD, and a whole list of other chronic conditions that tend to creep up on us. Chronic conditions can cause us to need assistance in day to day activities, but do not cause sudden death. Many people cannot afford the help they need due to chronic conditions without some form of LTCi.
Yes, LTCi is a terrible investment, just like term life insurance. It is purely to cover the catastrophic bills for care, like the term life insurance covers the catastrophic loss of income due to death.
I got my LTCi at age 52, while I was still healthy, and could not purchase it today, even though I am very active (and hopefully still cognitively aware of what is going on around me). How long will you wait? Do you feel lucky today?
For more information visit www.TheLongTermCareGuy.com