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Should You Buy Long-Term Care Insurance?

If you’ve ever considered purchasing a long-term care insurance policy, you probably already know how expensive it is for that type of coverage. Then again, if you know how expensive it is to stay in a retirement community, you know that it will drain your savings very quickly if you have no coverage against it. It’s nearly impossible to know ahead of time whether you will need to stay in an assisted-living environment at some point in your life, so the decision of whether to buy long-term care insurance is a high-stakes gamble.

Of Americans that reach the age of 65, an estimated 45% will require some type of long-term care insurance in their lifetime, according to Milliman, an actuarial firm. This means that the odds are nearly even, but it’s slightly more probable that you will not need LTC insurance. If you have a debilitating condition like diabetes, severe arthritis, or obesity, the probability that you will need LTC goes up. Furthermore, medical technology continues to improve by leaps and bounds. It’s not unreasonable to think that by the time you’re elderly, medical technology will keep you alive but won’t return your youthful exuberance. Therefore, the percentage of Americans who require LTC will probably rise over time.

If LTC insurance was more affordable, it would be an easy choice to make. Traditional policies that pay a $150 daily benefit and adjust for inflation typically cost upward of $1000 per year. Fortunately, some insurers who offer long-term care coverage are coming up with ways to reduce premium costs. Here are a few things to remember when you’re shopping for LTC coverage:

1.) Don’t buy coverage unless you think you can afford a 10-20% increase in premiums later on. If you cannot make your payments, your coverage will be discontinued and whatever money you have paid already would be wasted.

2.) Save money by opting for a 90-day elimination period. This is similar to a deductible, but for LTC insurance. Your premiums will be lower, but if you need LTC in the future, you will have to pay for the first 90 days.

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