Should I Buy Long-Term Care Insurance?

Health
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By Tim Russell

Learn more about Tim on NerdWallet’s Ask an Advisor

There comes a time in most everyone’s life when they ask themselves, “Should I buy long-term care?” The answer is: most likely, but how?

About 70% of people age 65 and older will need long-term care services, according to research conducted at Georgetown University and Penn State University. That’s a big number that could very well include you. If you need long-term care, what will you do? Pay for it out of pocket?

Here are five mistakes people make when it comes to purchasing long-term care insurance — mistakes that you should avoid:

1. Waiting too long

It’s unfortunate that many people don’t generally even think about long-term care until age 60—by then, it may be too late. You may be unable to qualify because of health reasons or you may not be able to keep up with the rising costs.

Start thinking about it in your 50s. Do a little research and talk it over with your financial advisor so that when the time comes, you are prepared.

2. Buying based on price alone

There can be quite a gap between the most expensive and the least expensive policy. But there is a reason. Certain policies come with different options, some of which you may need, and others you may not.

Reliability matters most here. Choosing a company with a positive reputation, one you believe will be around to honor your claim when you need it, is invaluable. All benefits and guarantees are based on the ability of the insurance company issuing the policy to pay out claims, so it’s important to know the financial standing of your chosen insurance company.

3. Not using shared benefits

Fewer than half of couples that purchase long-term care policies exercise the option to share benefits, according to the American Association for Long-Term Care Insurance. This is an obvious way to save yourself from needlessly purchasing two individual plans.

Purchasing a shared-care rider is far cheaper than buying two policies. Riders are additional guarantee options that are available to a life insurance contract holder. While some riders are part of an existing contract, others may carry additional fees, charges and restrictions, and the policyholder should review the contract carefully before purchasing.

4. Not accounting for inflation

Inflation has a way of skewing your projection for future needs. Thirty years of inflation can have a major effect on the value of your policy and its purchasing power.

You can avoid the diminishing value of your dollar by purchasing inflation protection, but you have to purchase the right kind. The more inflation you protect yourself against, the more it will cost. Focusing on a smaller inflation rate can give you a level of protection at a smaller cost.

5. Skipping the fine print

No matter how small it is, you’ve got to read the fine print. There are far too many cases where claims are rejected because of what’s found in the details of the contract. It is always important to know things such as elimination periods and services covered.

These mistakes all can be avoided with a little homework and with some help from the right people.

Tim Russell is a Registered Representative with, and securities are offered through, LPL Financial, Member FINRA/SIPC. More posts related to this subject can be found at http://valleyoakwealthmanagement.com/voblog