Long-Term Care Insurance

Posted by Heidi Clute - July 7, 2012

Does Long-Term Care Insurance break or protect the nest egg?

It may seem a bit unusual to be examining insurance with a financial advisor, but looking at long term care insurance is a critical step in the retirement plan process. It is much easier discussing the risks potential health problems can pose to your retirement plan now, while you’re healthy, rather than later when it may be too late. Exploring the viability of long-term care insurance can provide peace-of-mind and flexibility to you and your family in the future if something were to happen.

What is long-term care insurance?
This type of insurance should not be confused with health insurance, which helps cover costs associated with doctor appointments, hospitalizations, etc. Long-term care insurance (LTC) by contrast provides income to offset expenses associated with assisted living facilities, nursing homes, and/or in-home care. Usually LTC insurance “kicks-in” when a person needs help with at least two of the “activities of daily living” or has a cognitive impairment. Policies may cover anything from help with basic household chores to highly skilled nursing functions. Your advisor can help you compare options and provide guidance on whether to consider a stand-alone LTC policy or a life insurance policy that can provide LTC benefits.

Is long-term care insurance affordable?
Like other types of insurance, age, health history, and costs among policies and carriers can vary widely. LTC policies differ from other types of insurance in that they can be designed to provide flexibility and to meet your individual planning needs. Your advisor will help you to determine your actual insurance need; what assets you’re willing to use to “self-insure”; different types of benefits you may be interested in, etc. A LTC insurance policy can be affordable depending on your individual needs and age (the younger the better).

What are the trends?

  • According to the Genworth 2012 Cost of Care Survey, costs for facilities have steadily increased to approximately a 4.28% compound annual growth since 2007.
  • The majority of nursing home residents are women due to their longer life expectancy (source: Genworth 2012 Cost of Care Survey).
  • People are over five times more worried about being a burden on their family than dying (publication source: Our Family, Our Future: The Heart of Long Term Care Planning).
  • While two-thirds of people will actually need some long term care after they reach age 65, only 35% of people believe they will need it (publication source: Our Family, Our Future: The Heart of Long Term Care Planning).

It’s important to remember that LTC insurance may not be available once you are diagnosed with an illness or disability. Therefore, most experts say it is best to purchase it while you are under the age of 60 and are healthy. Like other types of insurance, there are no guarantees you will ever need it – or if you do need it, that the coverage will be sufficient to meet all of your expenses. (Source: http://www.npr.org/2012/05/08/151970188/long-term-care-insurance-who-needs-it)

Is it worth it?
From a financial planning perspective, there are many factors to consider in the LTC insurance equation. Here are some questions to discuss with your advisor to help you make an informed decision:

  • How old are you and are you in generally good health?
  • Is there a family history of Alzheimer’s or similar illness?
  • Do you have a sizeable savings for retirement and do you wish to protect it for your heirs?
  • How do you plan to pay for nursing home costs if something were to happen to you?
  • Do you wish to burden your family with assistance for daily activities as you age?

The answers to these questions can help you decide whether LTC insurance is a viable option you should consider. If it does seem like the right move for you, your next steps will entail comparing policies, coverage, costs, and companies. LTC insurance information resources can be found at:


Association for Long-Term Care Insurance:


National Clearinghouse for Long-Term Care Information:

Administration on Aging:

Heidi Clute, CFP® of Clute Wealth Management in South Burlington, VT and Plattsburgh, NY, an independent firm that provides strategic financial and investment planning for individuals and small businesses in the Champlain Valley region of New York and Vermont. For informational purposes only. LPL Financial does not offer legal or tax advice. Securities offered through LPL Financial, Member FINRA/SIPC.

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