YOU ASK:

How much long term care insurance coverage do I need?

WE ANSWER:

It really depends on your own needs. Please remember that this will depend on your lifestyle and how you want to spend your retirement.

Here are some points to consider to help you decide just how much long term care insurance coverage you need:

  • Other resources. Do you have a savings account or retirement plan that you can use to supplement what you are expected to receive from your insurance? How about other relatives that can help provide for your needs? What assets do you have? You can consider selling your home (unless you want to preserve it for your heirs) or getting a reverse mortgage. This kind of mortgage provides you with monthly payments against the equity of your home.
  • Do you want to keep up with the lifestyle you now have? What level of comfort do you want? What equipment would you like your long term care facility to have?
  • What premiums can you afford? It is tempting to go for the plan that provides the maximum level of benefit. However, the question is, can you keep up with the premium payments for this plan. If you don't, you may be forced to cancel the policy. You need to have a balance between what premiums you can pay, as well as the benefits you can expect.
  • What is the current (and expected) inflation rate? You also need to consider that medical and long term care costs will continue to increase over the years. You should compare this with the benefit amount the policy will provide. The proposed benefit amounts may seem acceptable today, but you should foresee just how much they can cover at the time that you will be making your claim.
  • Other riders. When speaking of how much long term care insurance coverage you need, you should also take a look at riders you may include. Of course, additional benefits will mean additional premiums. Here are some examples:
    • Return of premium benefit. This will refund a portion of your paid premiums in case you cancel the policy or you pass away before you can make a claim.
    • Cost of living adjustment rider. This will increase the benefit payments at a given percentage per year.
    • Waiver of premium rider. This will waive premiums when the insured is disabled or is admitted in a nursing home or care facility.

Knowing just how much coverage you need (and buying that coverage!) would not only give you peace of mind but will help ensure that you are provided for when the inevitable (aging and the need for care) comes.

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