Long-Term Care Insurance 101 - Part Two

In Part 1, of Long Term Care Insurance 101, we covered what long-term care is, why it can be so expensive, and how a long-term care insurance policy works to protect you and your family. Now that you understand the basics, two questions naturally follow: Is LTCI right for me, and if so, when should I act? The answers come down to your finances, your health, and your age, so let's walk through how to think about each one.

WHO SHOULD GET LTCI?

LTCI is designed to protect a portion of your assets if you ever need care. People who have little to no discretionary income and minimal assets generally aren't good candidates, because they couldn’t afford premiums and they don't have assets at risk. They would likely qualify for Medicaid if they needed care.

For people who can pay premiums out of current earnings or reposition existing assets, LTCI is worth considering. It is a way to efficiently deploy your assets and essentially "get a discount" on the cost of care, thanks to the leverage of the insurance product. For example, every dollar in premium might create $5 or more available for care.

Even if someone is a good candidate based on their financial situation, they still have to undergo medical underwriting. Underwriting for Traditional policies is stricter than it is for Hybrid policies. If you are interested in LTCI, it is essential to work with a long-term care insurance specialist, and that person should ask you detailed questions about your health history. There are so many different options today, with various features, which makes it that much more important to work with a specialist who knows all of the available products and can design a plan around your particular situation.

WHEN IS THE RIGHT TIME TO START LOOKING FOR LONG-TERM CARE INSURANCE?

Because reasonably good health is what makes you eligible for LTCI, it is a good idea to start learning about your options in your 40s. Anyone with a family history of or genetic predisposition to dementia should consider applying for coverage as close to 40 as possible. Premiums are less expensive the younger you are, so there is a real benefit to putting coverage in place as early as you can.

The thread running through all of this is timing. Your health and your age are the two factors most within your control, and both reward acting sooner rather than later. If you are in your 40s or 50s and in good health, you are in the strongest possible position to put coverage in place on favorable terms. The best first step is a conversation with a specialist who can look at your full picture and tell you honestly whether LTCI makes sense for you, and if so, what a plan might look like. If you would like to explore your options, I would be glad to talk.