The Wall Street Journal ran an article on strategies one can use when deciding how much long term care insurance coverage to get. The article says when it comes to long term care insurance, a “long and thin” policy might be better than a “short and fat policy.” The article says:
“Conventional wisdom holds that buyers of long-term-care insurance — assuming they can’t afford lifetime coverage — should look for a policy with a hefty daily benefit that covers about three or four years of care. The rationale: Studies indicate long-term-care needs typically don’t extend beyond that length of time.
The primary purpose of most insurance, Mr. Farrell notes, is to protect against “financial disaster — expenses you can’t cover yourself.” The biggest risk with long-term care, he says, is not that you will need such care but that you may need lots of it. Many people, he notes, could pay for two or three years of care using retirement savings, home equity and Social Security.
But how many of us could pay for six years? Or 10?
Thus, rather than a “short and fat” policy with a big daily benefit for a few years, Mr. Farrell recommends looking at “long and thin” policies with a smaller daily benefit that covers an extended period of time.” Wall Street Journal
The author goes on to give the example of a wife and husband who decided to budget $4,500/yr for long term care insurance. The couple finds that the money will buy policies covering each for $40,000 of expenses a year for four years, or a $30,000 10-year policy for each spouse.
If one spouse needs LTC for 3 yrs the first plan is fine, however, if one needs LTC for 10 years then you are in trouble with the 3yr plan. In summary, the first option gives you 10k more a year, but far less coverage down the road. The second option gives you 10k less, but 6 more years. Most people can come up with 10k themselves out of their income, but having to fit the bill for 10 years would be devastating .
The bottom line article says: “Five, seven or 10 years of care could effectively bankrupt” a family, Mr. Farrell says. “That’s the biggest threat, and that’s what you need to prepare for.”
At LTCtree we have over a decade of long term care insurance planning experience and since we work with most all of the the top companies we will help you come up with a plan that fits your financial situation.
