Professional nursing care whether received at home or in a facility -is expensive. It’s so expensive that paying for it, out of pocket, will devastate or seriously impair most otherwise sound retirement plans. That is why long-term care insurance, like that available to federal employees, annuitants, and their families through the Federal Long-Term Care Insurance Program (FLTCIP) have been developed. Long-term care insurance is designed to help manage the risk of incurring catastrophic long-term care expenses. It’s important to understand that buying and paying for long-term care insurance poses risk of its own. Imagine paying thousands of dollars per year for decades, only to have to cancel the insurance before you need the benefits because you can no longer afford the premiums. In this case, paying for the insurance has impaired your ability to afford long-term care when you’re most likely to need it -near the end of your life -and increased the financial risk you face. Since long-term care insurance premiums are not typically guaranteed against increase for life, this risk is not only real, but l think you should consider it likely.

Long-term care insurance is expensive (you can check the premiums at because long-term care is a poor candidate for insurance in the first place. As I’ve already pointed out, the cost of care is high. The likelihood of needing care is also high. Insurance works best on risks that are large enough to be catastrophic, but also unlikely to occur, like an accidental fire that burns your house to the ground. You can buy fire insurance on a $500,000 home for a few hundred dollars per year. Buying $500,000 worth of long-term care insurance benefits will cost ten times that amount, or more, depending upon your age. In addition to the already-high cost, insurers generally have the freedom, and a strong incentive, to raise the premiums on older policy holders, particularly if these older policy holders will cancel their coverage before they file a claim. Since older policy holders are generally less able to absorb large increases in spending, they are more likely to have to cancel their insurance coverage than their younger -and healthier -counterparts.

So, how do you insulate yourself against the risk of catastrophic long-term care costs and also minimize the risk of wasting money on long-term care insurance you’ll never use? I recommend you should be thinking about term life insurance. that you think of long-term care insurance like It’s best used as temporary protection against a risk that should diminish over time, until it eventually disappears. Term life insurance becomes prohibitively expensive as you approach your life expectancy. It’s designed, and priced, to cover the risk of an unexpected death -not an expected one.

You should treat long-term care insurance the same way. Rather than expecting insurance to pay your bills when they are expected to occur, late in life, develop a plan to accumulate the funds you’ll need to pay for long-term care, if you need it, by the time you are old, and use longterm care insurance to cover the considerably less likely possibility that you’ll need care before you have accumulated enough in savings and investments to self-insure. In other words, employ a financial plan that will allow you to drop your long-term care insurance before you’re most likely to need it.

A few hundred thousand dollars, per person, should be a fund sufficient to pay for all but the most unlikely need for long-term care for the average person. If you have that amount available now, you can consider self-insuring for long-term care and foregoing insurance. If you don’t, develop a financial plan that puts you on a course to accumulate the funds you’ll need by the time you reach your mid-to late-seventies and only buy enough long-term care insurance to cover the difference between your target fund and your current fund as you go along. This will help you to minimize the cost of the insurance you carry and the risk that you’ll pay for insurance that won’t be there when you need it.

Written by Mike Miles
For the Federal Times
Publication September 16, 2019