My wife and I purchased long term care policies 25 years ago when they were relatively inexpensive. Now, our premiums have increased by more than $500 a month for the third time and will increase again in six years. I think I paid about $72,000 in premiums. Now, in my late 70s, I am trying to decide whether to accept the increases or cancel the policies. what do you think?
No one likes paying higher premiums and it can be frustrating to see them increase. However, just as it was when you initially decided to purchase the policy, the issue at hand is whether or not you still need to pay for the coverage. (And if you need help planning your long-term care or saving for future expenses, Consider talking to a financial advisor.)
The price of the previous premium
Before we get straight to the question, let’s talk about the $72,000 you’ve paid up to this point. I’m not sure if you’re suggesting you continue or stop because you spent that much money, but it shouldn’t sway your decision either way. The previous ones Premium They are discounted, and the insurance coverage you bought is out of date. It’s no different than the $10 you spent on lunch yesterday.
The cost of insurance going forward
The real question is whether you still need it or not Long-term care insuranceAnd if the coverage offered by your policy is worth $500+ per month.
I think there are two big concepts to consider when thinking about your decision: your age and your resources and goals.
The first is your age and the likelihood of needing long-term care. It’s been a few years, though This Morningstar article It explains some relevant long-term care statistics that I think illustrate what we all intuitively know. As we age, the odds of needing long-term care increase. Data from 2018 shows the percentage of people who need long-term care:
So, the days are ahead of you when you may need long-term care, unlike the premiums you have already paid. (A Financial advisor (It can help you prepare for future expenses like long-term care.)
Your resources and goals
Although it goes without saying, just because you’re more likely to need long-term care in the future doesn’t mean you need long-term care insurance.
Depending on how your investments have performed and what you have spent in the process Retirement (Assuming you’re retired, which you probably won’t be) Your account could have grown enough that self-insurance makes sense. I really don’t know that, indicating that it is possible. If not, your decision is pretty easy in my opinion. If you can continue to make premium payments, you probably should.
Even if you can reasonably self-insure, you’ll want to think about what to do with your savings. Just because you can get self insurance doesn’t mean you should or should. Long-term care insurance can help you avoid depleting all of your assets, which in turn provides some protection for any money you want to leave to your heirs. That alone may make it worth it to you, depending on your financial goals. (And if you need help planning and planning for financial goals, such as passing on assets to an heir, Talk to a financial advisor.)
I think there’s still a good chance you can continue to keep your long-term care policy, but take what we’ve discussed above as a starting point to evaluate your situation. See if the new premiums fit within your budget and help you achieve your goals. Assuming they do, keeping your policy may be the best option.
Tips for finding a financial advisor
Finding a Financial advisor It should not be difficult. SmartAsset’s free tool It matches you with up to three vetted financial advisors in your area, and you can make a free introductory call with your advisor matches to determine which one you feel is right for you. If you’re ready to find an advisor to help you achieve your financial goals, Start now.
Brandon Renfro, CFP®, is a financial planning columnist for SmartAsset and answers reader questions on personal finance and tax topics. Have a question you want answered? Email [email protected] and your question may be answered in a future column.
Please note that Brandon is not a participant in the SmartAdvisor Match forum and he is being compensated for this article.
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