Long Term Care Insurance - is it worth buying?

Excerpt From NPR Family Matters series:

Long-Term-Care Insurance: Who Needs It?

by MARILYN GEEWAX

Is it worth buying?

"Experts say the insurance can be a huge help, especially for people without children and relatively small retirement savings. But it's far from a perfect solution to all problems. For example, a policy typically covers three years of care, but many people live long beyond that cap. And the new policies are being written with more restrictions to limit insurers' risks.

Whether it makes sense to spend so much money on premiums, rather than focus on building up a retirement savings account, is a complicated equation that requires serious study."

Note:  "...especially for people without children and relatively small retirement savings."

Insurance is, after all, a form of gambling.  You are betting that you will get sick enough to need the policy.  The House is betting you won't need more than you have paid in.  But you can also look at it as a risk mitigation strategy.  Ask yourself the following questions:

"If I do not have the coverage, and do need substantial long term care, will I have enough resources to cover the cost of the care and still be comfortable?"  Answer:  Yes.  Action: Don't buy coverage.  Answer:  No.  Action: Buy it.  Answer:  Maybe - Weeeeeeeelll, the decision becomes very personal, and relates to your comfort level with the probability of your remaining in long term care facilities longer than you can afford.  

If, at the beginning of your long term care needs, you have sufficient resources to cover the likely costs, then LTC Insurance may only be worth it if you want to retain assets to pass on to someone.  On the other hand, if at the beginning of your needs you will not, then LTC might keep you out of medicaid a bit longer.  But, if you have no retirement kitty, Medicaid may be inevitable.

But if the probability of needing LTC for a long period at all is iffy, and you are comfortable with the gamble that you will not need it (in other words, you can live with the outcome if you are wrong), then why gamble?

Here is one "why":  I am a male.  I will not (likely) live as long as my spousie (we are not a same sex unit).  So, If I think I will need LTC for a long time before passing on to that elder hostel in the sky (or wherever), and during my needs we will have spent our wad, then there will be less or little for my spousie to sustain her in elderhood.   How's she gonna attract that second husband without some bait money? 

Experts don't agree (see the WSJ 5/13 "Should you purchase long term care insurance).  Friends will disagree.  Hell, there are times when I disagree with myself.  My advice would be, pick your strategy, periodically re-assess the ongoing costs (not the sunk costs you have already incurred - they are irrelevant), and then go have a glass of wine and relax.  With my luck, I will live to 108 and then die suddenly while falling off a bar stool in the Candy Store as I check out the booty of that new hot server that Stephan just hired. 

What a way to go!

Michael

PS, there will be one more post on this subject concerning a strategic decision that could result in a resounding "NO" to LTC Insurance.  Research is pending.  Then, enough already.  We have other things to talk about.