Deciding Whether to Buy LTC Insurance

Consumer and financial experts generally agree that LTC insurance is a bad investment unless the monthly premium is 5% or less of your monthly income. When calculating this 5% figure for future years, bear in mind that your premiums are likely to rise, while your income will probably drop.

In general, when you reach your 80s, if, in addition to your home, you expect to have substantial assets -- over $300,000 in assets and over $50,000 per year in income (in today's dollars) -- then a long-term care policy with high benefits and compounded inflation protection might be a reasonable investment.

If you are considering LTC insurance, be a very careful consumer. Comparison shop among several policies, checking each for exclusions and limitations. Don't base your decision solely on advice from an insurance agent or broker who is trying to sell you a policy. Check the latest analysis of LTC policies by Consumer Reports, a consumer information magazine that regularly does comprehensive studies and comparisons of particular policies. You can find Consumer Reports at any local library or online at www.consumerreports.org (you may have to buy a subscription to access certain information).

Remember that you may never need long-term care at all, or you might not need enough care to collect much in the way of insurance benefits. Before you make a final decision, ask an accountant or other financial advisor whether there might be more profitable ways of investing the money you would otherwise put into insurance premiums. Those investments may provide better protection and liquidity for your money than a long-term care insurance policy. And you'll have to spend that money on care only if you need it.