Q. How can I figure out if I need long-term care insurance?
A. There's no one answer that applies to everyone. The United Seniors Health Cooperative, a nonprofit consumer organization devoted to the issues of the elderly, suggests that long-term care insurance is appropriate provided it costs no more than 7% of your retired income and:
- You have $75,000 or more per person in assets, excluding a home and a car.
- You have a retirement income of at least $35,000 per person per year.
- You can pay the premium without adversely affecting your lifestyle.
- You could absorb up to a 30% increase in future premiums, if necessary.
If you're fairly wealthy, you may not need this insurance. Figure out what the kind of nursing home care you'd want would cost, and see how many years you could easily pay for it. If it won't present that much of a problem, you may be better off not paying hefty premiums to cover expenses you might not incur since you have alternative means of paying for them should they materialize.
Learn more about long-term care insurance and other kinds of insurance you might need in our Insurance Center. You can learn more about retirement issues in our retirement area and in our Roadmap to Retirement online seminar, too.
This question and answer is adapted from The Motley Fool Money Guide: Answers to Your Questions About Saving, Spending and Investing. For answers to this and 499 other common money questions, check it out -- it's a handy resource.
___________________________________________
Reader Responses to Previous Q&As
The Plus Side of Pre-Need Funeral Insurance
Overall, I agree with your comments [on pre-need funeral insurance]. But, for people without a lot of money, purchasing an irrevocable burial trust is critical to prevent their families from being saddled with a large bill when they die.
When a person is in need of care, say at a skilled nursing facility, they are required to deplete their assets nearly completely prior to receiving Medicaid. If that person does not have an irrevocable burial trust, their family will be saddled with their funeral expenses. On the other hand, if that person buys an irrevocable burial trust, Medicaid ignores those assets. Therefore, the person can receive Medicaid, even though they have (inaccessible) assets in the form of an irrevocable burial trust. When they die, their funeral costs are covered.
If someone has a lot of assets, then this is irrelevant. If not, it is a very important consideration.
As with all financial advice, one size does not fit all. Each person's individual circumstances need to be contemplated. -- M. P., Chartered Financial Analyst
RSS Headlines
Fool UK
