Long-term care insurance may seem like an obvious way to round out a well-planned retirement strategy, but the truth is that it's not an ideal solution for everyone. While long term care insurance can be helpful for some individuals, others might find that the risk outweighs the potential rewards. How do you know when you need long term care insurance?
Don't bother with long term care insurance if you might not be able to pay the premiums.
If your retirement plan has you on a fixed income, and rising long term care insurance premiums might present a problem to you down the road, think very carefully before you take out a policy at all. If you should ever default on a long term care insurance policy, or stop paying the premium for any reason, you'll lose your coverage. The policy won't be there when you need it, and you'll never see a penny of the money you did pay into your policy. If money is going to be tight for you, either make sure you budget enough to pay the premium or don't start the policy at all.
Long term care insurance isn't worthwhile if you're under 60.
Long term care insurance providers lure younger buyers into thinking they're getting a great deal on a low premium if they buy young. Unfortunately, that strategy works in the favor of the insurer. If you buy a long term care insurance policy in your 40s, and don't need to use the policy until the average nursing home entry age in your 80s, you'll have been paying premiums for over 40 years. You'd be much better off to pay into an annuity or other retirement account if you're significantly below the age of 60.
Consider long term care insurance if you're at high risk of a debilitating illness.
Qualifying for long term care insurance can be tricky. Most insurers require you to take a physical exam before issuing a policy, and it can be more and more difficult to pass that physical as you age. By the time you know you need long term care insurance, it's usually too late to qualify. Consider your family medical history, and any specific health risks in your background. If you're at high risk for congestive heart failure, Alzheimer's or other debilitating medical problems, it might be a good idea to purchase long term care insurance before you begin showing any signs.
Take a look at the financial health of the long term care insurance provider.
Unfortunately, you can't take it for granted that your long term care insurance provider is going to be around in the next decade or three. In some cases, insurers go under and your policy is void; you may only receive a portion of what you paid into it. In other cases, another insurer may buy yours, and you could be stuck with high premium increases. If you do determine that you need long term care insurance, make sure you gauge the company's health before you buy.
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