Why You Need Long-Term Care Insurance

How will you pay for this care for yourself down the road, or for your parents, in the coming years? If your aging parents can't care for themselves, they may be occupying the bedroom just vacated by your child who has gone off to college!

Shocking, to be sure -- but it will look like a far better alternative for care than a ward in a Medicaid-funded nursing home. Medicaid is the program that promises to pay for care, and it does so primarily in nursing homes. Many people figure they'll spend all their assets and then let the state take over. What will that care look like in 15 or 20 years?

OK, I got your attention. Now what should you be doing?

What to Do?

If you can pay for your care, there will be alternatives ranging from home care to assisted living to nursing homes that accept only privately paid patients. But typically this cost can devastate a family's retirement savings and leave a surviving spouse without any assets.

The first step is to consider the purchase of long-term care insurance. It may be too expensive for many people, but those who can afford at least some coverage will ensure that they do not spend their last years in an underfunded, overcrowded nursing home. Since these polices come with "concierge" services to find appropriate caregivers, this is a must-do for women who are alone.

The time to buy is in your late 50s or early 60s, when costs are lower and you're healthy enough to qualify. Look for a policy that offers three years of coverage, with at least a simple inflation increase. You'll likely have a 90-day deductible -- three months of care that you must cover before the insurance kicks in. Optimally, you'd like to purchase $200 per day in coverage, but even $150 will be a help.

Purchase your policy from a major, reputable company. Independent agents sell policies from the likes of John Hancock(MFC Quote), Genworth(GNW Quote) and MetLife(MET Quote) so they can compare coverages and costs.

What if you never use your policy?

Congratulations. I hope you never need to use it, or your homeowner's insurance in case of a fire. But the chances are 10 times as great after age 65 that you'll need some form of care than that your house will burn down.

Insurance is always a bet against the odds. But you can't collect if you don't bet. And that's The Savage Truth.

Note: On Monday, March 31, Terry Savage will be featured in a one-hour PBS special: The Retirement Revolution. Check your local listings for showtimes.

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