Is Long Term Health Care Insurance Necessary?
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.
Ah, but you say - I'm earning interest on my $750,000.
Yes you are but how stable is that return? As of 2008 the stock market has fallen and fluctuated greatly. Take a look at this little excerpt:
"Between late December and yesterday's Federal Reserve interest rate cuts, most major stock indexes had dropped by more than 10 percent, and several by 20 percent. NYSE's S&P 500 was down from 1500 to 1310, or by 13 percent, and London's FTSE was also down by 13 percent. Germany's DAX is down 15 percent, Tokyo's Nikkei is down 20 percent, and Hong Kong's Hang Seng 23 percent." (Visit PPI for more information)
The dates for that excerpt are late December 2007 to January 23rd 2008. Lots of losses. Your $750,000 could have lost 10% (75,000) or the awful 20% ($150,000). Depending on your age you might be very effected by those losses.
Also, there is the investment idea of risk to earnings based on your age. If you're 20 then 80% of your portfolio should be in risk (which can be regained over the long haul) and 20% in conservative funds. The converse is true as you get older. The older you get the less time you have to recoup your losses. When you're 80 the risk ratio is more like 20% in aggressive growth and 80% in conservative earning areas.
The key idea here is that long term care insurance is designed to insure retirement expenses that can wipe out your lifestyle, your finances and any inheritance you want to give to others.
While it may not be for everyone it might be for you. But, be forewarned. Insurance companies are in business to make money. They specialize in contracts that favor them. This is why as an ex-agent and long term care insurance specialist I wrote "Insider Secrets to Long Term Care Insurance; the Ultimate Consumer Buying Guide".
Long term care and long term care insurance is a serious and expensive business. This is why you should consider reading "Insider Secrets".
If you haven't read "Insiders Secrets to Long Term Care Insurance; the Ultimate Consumer Buying Guide" consider investigating it today. Inside this guide you'll discover the hidden loopholes and terminology that insurance companies use to keep you from getting at your benefits. The guide is written by an ex long term care insurance specialist who now works as a consumer advocate.
Learn more about "Insider Secrets" by reading the short report. You'll receive a free report that will help you decide if you should have LTC insurance and videos that explain even more about long term care and long term care insurance. Just visit the main page at Long Term Care Insurance Secrets.com