How to Know Whether or Not You Need Long-Term Care Insurance

By Tim OBrien on 08/05/2010 – 7:54 am PST -- Opinion

As a follow-up to my piece on the four times you’ll probably need long-term care insurance Money 911: Your Most Pressing Money Questions Answered, Your Money Emergencies Solved suggests that there are financial guidelines that can help you decide whether or not the insurance is for you.

Before I give the details, I need to mention that the book says that there are two schools of thought on long-term care insurance. The first says that you need it no matter what your financial situation. The second says that you need it only if you fall within certain financial parameters. Jean Chatzky, the author of the book, agrees with the latter way of thinking. As such, she offers this suggestion for telling when you do and don’t need long-term care insurance:

If you have a significant amount of assets — upward of $2.5 million or $3 million — you don’t need insurance for long-term care because you’ll be able to pay for your own care. If you have little or no assets — less than $300,000 — you’ll spend them down and then Medicaid will pick up the tab.

I’ve heard this “you don’t need long-term care insurance if you’re rich or poor, only if you’re in the middle” line of thinking before (I may have even posted on it.) Seems to make sense in general. That said, I have a few comments of the advice:

1. I’m expecting to be at or above $3 million by the time I retire. Still, I think I will investigate long-term care options when the time comes. I guess that puts me more in group #1 than group #2.

2. $300k is “little to no assets”? From what I could find online, a net worth of $300k places you well above the median net worth for Americans. (Sources: Wikipedia, CNN Money, and Bargaineering). As such, this isn’t really a “rich and poor” set of instructions, but sheâ€™s really saying that most people will not need long-term care insurance because they won’t have enough assets to warrant it. They will simply let the government take care of them.

3. Does anyone really want to “let the government take care of you?” Yikes! I shudder at the thought!!!

4. If the government is going to take care of most of the people and if people are living linger, doesn’t this mean the government will be providing for an ever-increasing set of people needing long-term care? What’s that mean for taxes as well as the lifestyle sacrifices/demands on those paying the bill for all the others in long-term care? Seems like a recipe for disaster to me.

What’s your take on the issue? Is long-term care insurance something most people need or not? Are there any general rules-of-thumb you can suggest to guide people in making a decision on this subject?

http://www.jenniferltc.com Jennifer Ragborg

If you could protect $100,000 or $200,000 would you? If you could decide to go on Medicaid but still have assets so you could afford to have a private room and get your hair done every two weeks, would you? These are the questions I ask middle-income boomers and their families. It’s all about having CHOICE so YOU decide what care is best for you and how best to spend your money. With state Partnership plans, we can protect assets to pass on, think of the family farm or lake cabin, or we can use some of that money to sweeten our care. Obviously, you need some assets for insurance to be a suitable purchase, but even wealthy people care about their legacy: do you have a charitable intent? do you wish to see your grandchildren educated? What other dreams do you have? These dreams evaporate if all the money is eaten up by the Alzheimers facility. The important idea is to PLAN and protect some level of your assets.