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With the multitude of insurances available for purchase, how do you know if long-term care insurance is the right choice for you? Long-term care insurance is all about risk management and how you answer the following questions will determine if you should consider purchasing it.

  1. In the event of a tragic event (such as becoming disabled) and you require long-term care services, would it overwhelm and diminish all of your resources and assets?
  2. What is the probability that you will require long-term care based on your family history
  3. Do you have enough income and retirement assets to fund the costs of long-term care?
  4. Should the need for long-term care occur, would you be willing and able to reduce your holdings?

An estimated two-thirds of seniors will eventually require long-term care and the same amount typically purchase it to avoid dependence on others, to protect their assets and to maintain their standard of living. If any of your answers to the questions above indicate that you would be at a major loss should you require long-term care services and you cannot afford to cover it, long-term care insurance may be the right choice for you.

It’s important to keep in mind that more than half of seniors only need the care for less than 3 months and the average stay at a long-term care facility is typically between one year and one and a half years. Therefore, if you have adequate funds to cover long-term care, you may not need to purchase insurance. If you do not have the funds in the event something were to happen to you, and preserving your holdings is crucial, then you should consider purchasing coverage.

To be sure you of your need for long-term care insurance (or lack thereof), find out what the average annual nursing home costs in your area. Subtract your fixed income sources (such as Social Security) and income derived from your assets. Should you fall short of covering the estimated costs, you should look into purchasing long-term care insurance.

If you decide that you would like to purchase coverage, do research on the companies you are interested in purchasing from. Not all companies provide long-term care insurance, so check with an insurance agent you trust to make a recommendation. It is important that the company will be around if and when the benefit is needed. Review the company’s assets and how long they have been in operation, and look for companies that offer policies that allow for customization to ensure you get the correct coverage. There is no “right” policy, but it is important that you find the appropriate insurance for your needs.