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The large majority of people who are over 50 years old should have long-term care insurance.   It is perhaps the most important financial decision of their lives, yet too often overlooked.  

When making such an important decision, it helps to break it down into phases such as the following four key steps: (Step #1) - Determine your process for decision-making. Are you using a financial advisor such as a financial planner, CPA, insurance agent, etc.? If so, who will it be? Does he or she have access to experienced general agents to get key info? Input from relatives such as spouse, children, parents? Expectations?   How detailed do you want to get? (Step #2) - Determine your need for long-term care insurance in the context of your health, your finances, your family relationships, and your risk tolerance level, etc. (Step #3) - Gather the appropriate information, such as financial info about you, quotes on different policies,   what-if scenarios, etc. (Step #4) - Compare policies and required adjustments to finances. (Step #5) - Choose the policy that is right for you and adjust finances if necessary.

Regarding Step #2 concerning the determination of the need for insurance, in my opinion, only if you meet all the following 3 criteria could you make an argument that you don't really need long-term care insurance: (a) - You are in excellent health and have an excellent chance of not needing long-term care (e.g. great family health history, not accident-prone), (b) - You have significant wealth and you are willing to bear the financial cost of a long-term care disability.   Ask yourself whether you can withstand a loss of about $300,000 without affecting financial stability or cash flow or whether you have no assets and such long-term care costs will be fully borne by another party. (e.g. Medicaid, welfare, wealthy children or parents),   (c) - You can emotionally handle both (I) living without sufficient protection against a long-term care disability and (ii) living in the aftermath of a long-term disability without sufficient protection, including the effects on other family members

In connection with Step #4 when comparing policies and their features and benefits, pay close attention to the following: (a) - Indemnity vs. cost reimbursement; professional vs. unlicensed providers, (b) - Coverage for nursing homes, home-care, and assisted-living facility, (c) - Coverage variables – Daily benefit; time period of benefits such as lifetime, 6 years, 3 years, etc.; elimination period; inflation protection, (d) - Personal policies vs. group plans, (e) - Miscellaneous provisions such as definition of disability, Alzheimer’s disease and other organic brain disorders, mental and nervous conditions, discounts for spouse, account with financial service institution, respite care, tax aspects, bed reservations, daily vs. weekly and monthly benefits, etc.

When you get to Step #5, don't despair if you feel you do not have enough current income to pay the premiums.   There are several alternative strategies such as increasing investment income, reallocating investments to get more cash flow, cutting expenses and other strategies, to be covered in future articles along with tax-related issues.    For this step, your financial advisor's guidance can be critical.

About the author

Frank Sisco is a CPA and Personal Financial Specialist, and author of several articles about personal finance and issues of life and money.   His firm, Financial Management Corporation, is located in New Rochelle, NY, where he resides with his wife and daughter..  He can be reached at his home office at 914.740.4422 or by email at ideasmoney@aol.com, or visit his website at www.LifeAndMoney.com which contains this article and prior ones.