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Is long term care insurance really worth it?

Is Long Term Care Insurance Really Worth itThe debate over long term care insurance continues. The insurance industry would have you believe that there is nothing more valuable than long term care insurance; skeptics will tell you that it is a scam and a fast way to bankruptcy. The reality may actually be somewhere in the middle of the spectrum.

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The truth is that long term care insurance does have value; but there is also truth to the expenses involved in buying the policy and the benefits not meeting their value.

To determine if long term care insurance is really worth it, you need to take several things into consideration, including your age, your family medical history, and your total current financial value (or future estimated value).

Depending on those answers, you may decide to skip the long term care insurance and invest your money elsewhere, or you may find the nearest insurance agent and sign up for a lifetime benefit long term care policy.

The Advantages of Long Term Care Insurance

Since long term care is very costly, the biggest advantage to long term care insurance is obviously financial assistance. Long term care insurance does not pay out benefits exactly the same as a health insurance policy. Rather, it has a specific payout amount that is usually based on a daily per diem and capped out at an annual maximum or a policy maximum. This method basically provides you with a way of drastically lowering the expense of a long term care facility, a nursing home, or even long term care in your own home.

An example of the cost advantage of long term care insurance follows:

You have a two year long term care insurance policy that is set to pay out up to $200 per day. You have a debilitating stroke and need to reside in a nursing home that costs approximately $8,000 per month for your particular care.
On an average month your long term care insurance will pay out $6,000 to your nursing home, leaving you with a balance of $2,000 for that month. While long term care is expensive, it can certainly be cheaper with long term care insurance.

The Disadvantages of Long Term Care Insurance

One of the disadvantages of long term care insurance is the cost of the policy. Premiums vary widely but can average to be $1,500 per year for a 60-year-old. If that 60-year-old becomes incapacitated within five to ten years then long term care insurance will probably be very useful. If that 60-year-old never requires long term care and lives to be 90-years-old, then that’s $45,000 in premiums spent without benefit payout.

The other disadvantage of long term care insurance is that, in many circumstances, the benefits usually end long before the long term care is over. Using the example from the above section of this article, the person with the debilitating stroke bought a 2 year policy.

Her 2 year policy has a maximum payout of $146,000 (based on $200 per day for 4 years). After 2 years is over, the long term care insurance is over but she still requires residence at the nursing home for the remainder of her life. At $73,000 per year out of pocket, any assets she had remaining will be rapidly depleted and it will most likely feel like the long term care insurance did not serve its purpose but to slightly delay the inevitable.

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Deciding if Long Term Care Insurance is Right for You

If your medical history shows a strong likeliness for a chronic illness that will leave you in need of long term care then you may want to consider buying insurance. As you age you will want to consider it simply as part of your reality. Anyone can become debilitated at anytime, but the likeliness rises the older you get and the more the factors for heart disease and stroke increase. However, the biggest deciding factor if long term care insurance is right for you is going to depend on your assets.

Excluding the value and equity of your home, if you have assets that exceed $300,000 then you may want to consider long term care insurance. Medicare Part A and Medicare Part B are designed to pay for some long term care costs, but only for a limited time. After your Medicare benefits are done, or if you don’t have Medicare benefits, then you are responsible for paying for your long term care.

Your home and your bank accounts will all be taken into consideration to determine what you can reasonably afford to contribute without causing harm to your dependents. For example, if your spouse still resides in your jointly owned house then the equity of half of the house cannot be used for your care. A certain dollar amount for monthly expenses will be designated for your spouse as well so that portion of your bank accounts cannot be accessed either.
The more assets you have, the more the nursing home will be able to take provided it doesn’t cause financial distress to your dependents. Therefore, if you have assets that are around a half a million dollars or more in various accounts or investments, that money can be taken to pay for your long term care and you and your dependent can quickly lose your life savings and your retirement funds.

Long term care insurance can reduce your payments for long term care without making you rob your own piggy bank. If long term care insurance sounds like it may be worth it for you, then enter your zip code now to get multiple quotes from various insurance vendors and start shopping now to plan for your future.

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