Today I was looking through the Wall Street Journal’s web site and found an appropriate article that deals with issues related to long-term care insurance.  (Link to the article is here.)  The article surrounds Charles Farrell, with Northstar Investment Advisors in Denver, and his opinion that a “short and fat” benefit that pays a large daily amount for a few years may not be the best.  Instead, he thinks that consumers should look at “long and thin” policies with a smaller daily benefit and longe period of time.

Mr. Farrell’s wisdom resonates with me, and I’ll explain why.  First of all, as we point out on our long-term care insurance buying tips page,  we recommend comparing several policies.  So let’s look at two different policies that a healthy 50-year-old could purchase:

• The first option: $100 daily for LIFE.  Benefit: “Unlimited” but assuming a 16-year claim (the maximum claim so far), at $100 daily, this policy would be worth $584,000.  Cost: $1,100 a year – and that includes a 5% inflation rider that will add a $5 daily bonus (or $1,825 per year) in benefits to the policy.
• The second option: $200 daily for ONLY three years.  Guess how much this plan costs?  Over $1,200 – or MORE than the above policy (with unlimited benefits)!  This plan would be worth only $219,000 – and costs more.

You can see why the “long and thin” option CAN have a positive benefit on your bottom line.  This is definitely food for thought when selecting a benefit period.  The biggest risk is using up MANY years of long-term care – and this is where a lower dollar, longer-period is more bang for your buck – should you need it.