Should you buy long-term care insurance? How to decide

One of the most difficult financial decisions for middle-aged and older people is whether to purchase long-term care insurance.

On the one hand, LTCI premiums are generally high, they’re likely to increase in the future, and if you’re in your 50s or 60s, the need is probably decades away.

On the other hand, many people have been saved by having LTCI. It enables them to choose their own care setting, hire help without dipping into savings, and preserve an inheritance for their children.

Because it’s a difficult decision, it’s tempting just to put it off. But unless your circumstances are likely to change drastically in the future, the best time to decide about LTCI is now. Every year you wait, you’ll face higher premiums, and you’ll also run the risk that a health care event will make you ineligible for coverage.

A good first step is to decide if you’re a likely candidate for LTCI. You are if (1) you have enough income and assets that you can afford the premiums without dipping heavily into your savings or dramatically altering your standard of living, but (2) you don’t have so much wealth that you can easily afford the cost of long-term care.

Keep in mind, though, that many very affluent people still choose to buy LTCI, because they’d rather have the coverage than pay for care out-of-pocket and reduce their family’s inheritance.

If you’re a candidate for LTCI, then you should consider that it’s basically a gamble: You’ll come out ahead if you need the care, but you won’t if you don’t. So you might try a thought experiment: If you need care in your later years, how comfortable would you be using up your savings to pay for it? Would it make you feel worse if you paid years of premiums for insurance you didn’t use, or if you had to pay out-of-pocket for expenses that could have been covered by a long-term care policy?

If you decide to look into LTCI, you should be aware that it’s one of the most complicated insurance products available, with policies offering a wide variety of rates, benefit levels and conditions for payment. There’s also a proliferation of hybrid policies that merge LTCI with life insurance. It’s a good idea to talk to a specialist in this field who can guide you through all the options.

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