Insurance Tip #2: You may not need long-term care insurance

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This post is part of a series where personal finance expert Dan Solin provides 10 insurance tips no one else will tell you. See all 10, plus one bonus tip!

Don't get me wrong. Many people do need long-term care insurance.

According to Debra C. Newman, the owner of an insurance agency that specializes in long-term care policies, 68% of Americans over age 65 will require some form of long-term care. The cost of this care can range from $3,000 to $9,000 per month. On average, care may be required for up to five years, with an average nursing facility stay of 2.4 years.

A common misconception about long-term care is that it is only required by senior citizens. Not true. According to one report, almost 40% of long-term care recipients were of working age.

But before you grab the phone to call your insurance agent, consider whether you really need this insurance.

Long-term care provides assistance with daily tasks for those who need some help in order to remain independent. The primary benefit of long-term care is that it may permit you to receive care in your home, so be sure your policy covers home care and not just nursing home care.

Before buying long-term care coverage, consider the possibility that your care may be covered by Medicare or Medicare Supplement insurance. Medicare does not cover "custodial care" (assistance with daily living tasks) either at home or in a nursing facility. However, if you meet certain conditions, Medicare may cover "medically necessary" care in a nursing home or at home.


If you have limited assets, your needs may be covered by the Medicaid program in your state.

If you have significant assets, consider whether it might make more sense to self-insure.

If you decide to purchase long-term care coverage, seek out a specialist in placing these policies. Among the many variables to be considered are the track record of the insurance company to its policyholders in all its lines of business, the benefit amount, whether the insurance covers home care, the waiting period before benefits will commence, the length of time benefits will be paid and whether or not the benefits are inflation protected.

Also, be sure that your long-term care policy is "federally qualified," so that the benefits you receive will be income tax free.

Finally, be aware that some agents frighten clients with the high cost of long-term care. However, often the clients cannot afford the premiums necessary to cover these costs. It order to rescue the sale, the agent compromises on length of benefits or other items. As a consequence, the client does not obtain protection against catastrophic costs.

See 10 more insurance tips from Dan.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books, 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, 2008).


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