Q My husband is 63 and I am 62 and we are starting to look into buying long-term care insurance. The annual premium really is quite expensive. I was wondering if you had any words of wisdom for us.

So far we have only looked into two different company policies and it was like comparing fruit salad to crab salad.


A I wish I had words of wisdom. Long-term care insurance is among the more difficult products to decide on. It's also an evolving product that I think is heading in a good direction with intriguing hybrid policies combining life insurance or annuities with long-term care. However, these products are relatively new and complex. In the meantime, my advice on whether someone should buy a policy is essentially "it depends."

Before you get to a decision it will take a lot of research. It's worth the effort.

The case for long-term care insurance is compelling for an aging society. A stay in a nursing home, moving into assisted living and home health care are all costly.

The problem is that the long-term care insurance policies aren't yet as compelling as the need. It's a complicated and expensive product. A number of brand-name companies have dropped out of the market. The companies found it a tough policy to price considering the uncertain combination of rising health care costs, an aging population, longer life expectancy and government policy. Many buyers of older policies ended up with unexpected premium price hikes.  

For younger families, the lure of buying long-term care insurance is that premiums are more reasonable than when they get older. The difficulty is that these same families often have a lot of demands on their money, such as retirement savings, disability insurance, an emergency fund, college tuition and life insurance. I wouldn't skimp on retirement savings to buy a long-term care policy.

A rule-of-thumb is purchasing a long-term care policy isn't worth it for those with relatively few assets, say, less than $250,000. Odds are they'll eventually turn to Medicaid if necessary. People with more than $2 million in assets have the financial means to self-insure. But rules of thumb are only a starting place for research. Look at your full financial picture -- assets, income, and expenses.

For the vast majority of people considering long-term care insurance the case gets strong when there's a family medical history suggesting the need will be there and at an early age. Even wealthy people can reasonably decide that buying it is a smart move for peace of mind. Like all insurance -- from fire to health -- you pay the premium and hope you never exercise the policy.

"People buy insurance in order to spread the risk," says Henry Hebeler of Analyzenow.com. "Some people with health insurance use a lot more medical than others. With long-term-care insurance, more than half don't get anything back, but the ones that need it benefit greatly."

The Society of Actuaries offers a basic introduction to long-term care insurance titled "Taking the Long-Term Care Journey.'' But you don't want to consider long-term care insurance in isolation. The answer to "it depends" comes after looking deeper into your financial resources and lifestyle choices during the last third of life.

Chris Farrell is economics editor for "Marketplace Money." Send your questions to cfarrell@mpr.org.