Long-Term Care Insurance--Not
Demographics may not be destiny, but America is getting older and an aging population will need plenty of long-term care. The cost of a nursing home is mind-boggling, and Medicare covers surprisingly little. The solution is long-term care insurance, right? Hardly. This is a business marred by scandal. The product is complex, difficult to understand. The costs are high. And this story from the New York Times is all too typical of the results.
Beware of the sales pitch. It's seductive. It's frightening. The need is there. But the product isn't.
It's starting to get dated, but Consumer Reports did a good piece on long term care insurance in 2003. Here's the link.
Here's the bottom line from the report: A CR investigation, for which we reviewed 47 policies, reveals that for most people, long-term-care insurance is too risky and too expensive. As with health insurance, you must keep paying to keep it in force. If premiums rise, you may have to drop the coverage, possibly losing everything that you've paid. The policy's benefits may cover only a portion of the total expense. Many policies are packed with catches that can keep you from collecting. Finally, there's no guarantee that long-term-care insurers, some of which have weak balance sheets, will be around 20, 30, or 40 years from now when you need them to pay.
Hopefully, better products emerge.