Many baby boomers are facing the decision of whether to buy long term care insurance. However, according to a recent article in The Wall Street Journal (“Six Mistakes People Make When Buying Long-Term-Care Insurance”), the decision has never been more difficult. About 70% of individuals age 65 and older will need long term care – whether in a nursing home, assisted living or at home. Unfortunately, at the same time the demand for long term care is increasing, the price of long term care insurance is also increasing. While long term care insurance is not for everyone – such as those who have little assets and those who are extremely wealthy, here are some common mistakes to avoid:
1. Waiting too long to buy. Most people don’t even consider buying long term care insurance until they are well into their sixties. By then, it is often too expensive or they can’t qualify due to health reasons. Most experts agree that the fifties are generally the best time to buy because premiums are often the most affordable and coverage is the easiest to obtain.
2. Buying on price alone. There is a wide gap between the least and most expensive policies. While price is important, applicants should be more concerned with buying long term care insurance from a large, stable insurance company.
3. Underestimating inflation. Inflation protection is critical. If you buy a policy in your mid-fifties and don’t need coverage until your mid-eighties, thirty years of inflation will significantly reduce the value of your benefits.
4. Overlooking shared benefits. A husband and wife can purchase a shared-care rider that allows them to share the benefits of each other’s policy.
5. Failing to compare hybrid and conventional policies. Hybrid policies are long term care insurance combined with life insurance or an annuity. Both have pros and cons that should be carefully analyzed when considering long term care insurance.
6. Failing to read the fine print. The old saying “the devil is in the details” certainly applies to long term care insurance. It is critical to understand the definitions and terms of a contract to know when benefits can be used.
If you should ever need long term care (and the odds are great that you will), long term care insurance can provide piece of mind knowing that your finances and care needs will be protected. To make sure you buy the policy that is right for you, be sure to consult with an elder law attorney.