Insurance, Simplified: Your Wealth (Part Six in a six-part series)

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I understand thinking about insurance is right up there with thinking about what happens with your money when you die (estate planning). Or thinking about taxes.  All are horribly boring and can often be depressing to consider.  To take the sting out of the thought of insurance, here is part six in a six-part series about what insurance you need, and what you don’t, if your aim is simplicity.

First, we talked about property insurance, along with its corresponding liability coverage.  Now we turn our attention to insurance coverage that concerns our bodies — as in life, health, disability, and long-term care insurance.  I have created a category for this that I call wellness insurance.  (Please note this is a term I just made up, so don’t go to your agent and ask for that!)  If you earn money for your household, you should consider insuring against loss of that income.  If you anticipate experiencing good health, consider insuring against health crises.  If you’re protecting your pile of loot for your old age, there is insurance for that, too.

Wellness insurance includes health, life, disability, and long-term care. This blog post tackles long-term care insurance.

If you have been diligent about saving for your retirement years and have now reached age 60, you should consider purchasing long-term care insurance.  As with life and disability, the goal is to protect your money.  But unlike those policies, long-term care insurance is meant to protect your accumulated wealth, not your income.  If you have a spouse and one of you needs an extended period of long-term care, it’s easy to quickly spend down your meticulously built retirement bucket.  Make no mistake, regardless of the type of care you receive, it will be expensive.

What is long-term care?  Long-term care is usually initiated when you cannot take care of yourself.  While the need for long-term care isn’t necessarily due to medical condition, it can be.  As we age, there may come a time when you are just no longer able to dress or feed yourself or get from your bed to a chair.  LTC insurance provides funds to get help with these, and other, activities of daily living.  Long-term care might be provided in your home, in an assisted-living facility, or in a nursing home, depending on your needs.  Regardless of where the care is provided, the price tag will be hefty.

What if you have no spouse or dependent relying on your portfolio?  In that case, it is a judgment call.  You build your retirement bucket to fund your expenses for the rest of your life, so you’ll be able to spend your bucket on care if the need arises.  On the other hand, if you want to protect some assets for a legacy to your heirs or perhaps to a charity, you may also consider long-term care insurance as a single person.

Some people do the homework and determine they do not wish to sacrifice lifestyle now to pay for a possible need to pay for care later.  In this case, they elect to “self-insure,” which simply means they are choosing to take their chances and will be responsible for paying for any care out of their own coffers.  While this may be the best choice for you, be sure to consider ALL options before making a decision.

As with all insurance, you should evaluate closely your personal situation and needs before diving in.  Long-term care insurance is ridiculously expensive, and the variations of policies are numerous.  Get professional help to evaluate your options.

Do your homework to protect your wealth in the event you need long-term care.  Here are a few additional thoughts for your consideration:

  • Seek advice:  It is best to get a licensed insurance agent to sit down with you to discuss your needs.  The guide provided here can help you get the conversation started.  Pay close attention to the recommendations an agent might give you, and if you feel you are being oversold, get a second opinion.
  • Review your coverage regularly: Don’t buy long-term care insurance and then forget it.  Review it annually to make sure all the coverage you have is still needed, or if any new coverage is required due to new circumstances in your life.
  • Simplifying your stuff simplifies your insurance: I have no snappy ending here.  Simplify other areas to save costs on other insurance so you can have a better shot at covering your long-term care insurance needs.  Just sayin.’

Your turn – share how you have handled (or not) your long-term care insurance needs!

Check out our entire six part Insurance Simplified series:

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