Should I buy long-term care insurance?

If you need long-term care services and have to pay to obtain them, what financial resources could you call on? Do you have enough to pay for four or more years in a nursing home, an assisted living facility, or home healthcare?

If you are over 65, don’t rely on Medicare or private health insurance to cover these types of expenses. Medicare doesn’t pay for custodial care, and private health insurance rarely pays any of the cost of long-term care.

If you expect to have very little money available when you need long-term care services, you might qualify for Medicaid, a government program that pays the medical and long-term care expenses of poor people. If anticipate being in that situation, you probably shouldn’t buy long-term care insurance, because your state’s Medicaid program will pay your long-term care expenses. Buying long-term care insurance would only save the state—not you—money. The exception is if you live in California, Connecticut, Indiana, or New York, states that have a Partnership for Long-Term Care program. For residents of these four states, buying long-term care insurance does offer an additional benefit.

If you expect to adequate funds when you need long-term care services, you also probably shouldn’t buy long-term care insurance. Instead, you should plan to pay for the care “out of pocket”—that is, as a regular expense. One financial advisor suggested that if your net worth is at least $1.5 million, not including the value of your home, you could safely skip buying long-term care insurance and treat long-term care expenses, if they arise, as you do your other bills.

If you fall in-between these two categories, owning long-term care insurance, like all other insurance coverages, offers peace-of-mind benefits as well as financial ones. For example, a survey of consumers ages 50 and over asked how confident they were that they could pay for long-term care services if they needed them. Among those with long-term care policies, 52 percent said they were very confident and another 40 percent said they were somewhat confident. Among those who didn’t own a long-term care policy, only 8 percent were very confident and only 27 percent were somewhat confident.

But if you are under 85—and especially if you are under 65—this does not mean you should ignore the topic of long-term care insurance.

• A Kaiser Foundation Health News study highlighted a significant gap in planning and affordability for long-term care, with a majority of adults not having had a serious conversation about future care or how to pay for it. Key findings showed that fewer than half of adults have discussed who would provide care or how it would be financed, and a significant portion of older adults are not confident in their financial ability to pay for needed care.
• According to a Kaiser Foundation study, 30 percent of applicants ages 60 to 64 were denied long-term care coverage and nearly half of applicants over 70 were denied. 

So, unless you have so little money that you will qualify for Medicaid, or so much money that you can pay the bills as part of your daily expenses, you should consider buying long-term care insurance.