Not everyone should buy long-term care insurance. Wait, what, not everyone? That’s right, not everyone should buy it.
Reasons to buy long-term care insurance
First, there are many reasons to buy long-term care insurance.
A policy allows you to:
- Have access to quality care and stay in control of your care options.
- Protect your family from the physical, mental, emotional, and financial consequences of a LTC event.
- Use professional services that can help your family coordinate and manage care.
- Leverage your money so that each dollar that you put into the plan, you will be able to get a multiple of dollars back, tax free.
- Avoid tax consequences because you don’t have to convert assets to income.
- Gain tax advantages. Benefits are received tax-free up to limits and you may be able to deduct a portion of the premiums as a medical expense.
- Leave a legacy to your heirs.
- Make an unmanageable situation manageable.
- Receive other benefits like caregiver training, home modifications, respite care, and bed reservation.
- Have dedicated funds for LTC so that your financial advisor is freed up to invest in ways that maybe otherwise they wouldn’t be able to.
With so many reasons to buy long-term care insurance, why shouldn’t everyone buy it?
It’s pretty simple… if you can’t afford it without it radically affecting your lifestyle, then it’s not right for you. If you have minimal income and assets and are currently receiving or may soon receive Medicaid benefits, it’s not right for you. Some people want the coverage but can’t afford it without it radically affecting their lifestyle, so their kids or other family members will pitch in to cover their premiums because they want them to have that protection. If you waited too long to buy it and won’t health qualify, then it won’t even be an option.
Some advisors and clients say they don’t need long-term care insurance because they have millions of dollars and they can self-fund their care costs, but having insurance provides so many benefits beyond the leverage, so why would you choose to self-fund if you can transfer the risk to the insurance company?
The Bottom Line
Not everyone should buy long-term care insurance. When we help clients, we review a variety of things including their finances and family situation. We can help you determine if buying insurance is the right fit for you. Our goal is to design a meaningful plan that is affordable.