QUESTION:

Should I have long-term-care insurance or just plan on paying for it myself?

ANSWER:

Long-term care is one of the most difficult topics in wealth management. Talking about death is uncomfortable for most people, and positively scary for others. It’s also a daunting task, full of difficult choices.

Costs vary greatly depending on the type of care: in-home, assisted living or nursing facility. Assisted living in a senior community can be relatively affordable, high-end nursing-care facilities can cost over $140,000 a year, and in-home care can be substantially more expensive than that.

Some folks have enough assets to pay for their own care without burdening their spouse or heirs. Others want options. The long-term-care insurance industry now offers several choices.

  • Traditional Policies used to be the most common but have lost popularity in recent years due to cost. You pay premiums on a continual basis, and if you die without needing long-term care, no benefit is paid. There are riders that can be purchased that will return premiums paid if they exceed the benefits used.
  • Hybrid Policies are a combination of life insurance or annuity with long-term-care insurance. Many varieties are available. Some policies allow you to pay one lump sum in advance, with no other premiums owed, and return the initial payment if the benefits are unused. In other cases, the death benefit can be accelerated to pay for care, or a cash value is built and can be used to pay for benefits.

Whether you self-fund or purchase an insurance policy, there will be tradeoffs. While there is no one-size-fits-all answer, the smart path is to reduce your anxiety and uncertainty by joining those who have a plan.

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