I’m hoping that I will never have to use my long-term care insurance. I know the odds are not in my favor and that 70% of us will experience a long-term care event, so not using my long-term care insurance is not likely. Still…
I also hope I never have to use my home owners, auto or health insurance. You won’t hear me complain about paying premiums and not using my coverage. Nevertheless, some clients do express this concern. They indicate that they will use their savings rather than “risk” paying a premium for something they never use.
The challenge is for this to work clients must save many more times than the cost of the insurance premium — typically at least $250,000 for singles and $500,000 for couples in today’s dollars. And the savings needs to earn 5% compounded annually after taxes to keep pace with increasing costs of care. (Please note these amounts will not likely cover an extended illness such as Alzheimer’s or 24/7 medical care at home.) And then comes the hard part, not spending this money on something else.
If my choices are 1) pay $2200 annually for a $250,000 fund that increases every year or 2) save the $250,000 quickly, be sure that it increases every year and don’t touch it, I’d much rather pay $2200 a year for something that I may never use. That’s much less painful than walking away from $250,000 that I can never spend.
Even if I never use my insurance benefit, I still have the use of my $250,000 savings and the profound comfort of knowing that I can preserve the quality of my life and my family’s standard of living. I won’t wipe them out financially and/or physically paying for and providing my care.
Cynthia DeGeorge holds the CLTC, Certified in Long-Term Care, designation. She is also a Certified Financial Planner, CFP® and one of the few CFPs who specialize exclusively in long-term care expense planning. Realizing the enormous exposure that long-term care expense posed for clients, Cynthia specializes in developing long-term care insurance solutions in the context of her clients’ holistic financial health and lifestyle choices.