Long term care insurance


Q. My husband and I signed up for the FLTCIP package a little over 10 years ago and are now in our early 70s.  I’ve set money aside from my inheritance to pay for the premiums, as they would be unaffordable otherwise.  The money I set aside should have been enough to cover 30 years of premiums, but if we can continue to expect huge premium increases every seven years, I will run out of money before I really need the coverage.  Please steer us to resources that can help us make the right decision; i.e., whether to keep one or both policies or drop them now while we still have money left that could be used to self-fund our care until we run out.  We are in the middle–not poor and far from wealthy–and both in relatively good health.  In order to avoid the previous increase, I transferred to the new plan and cut our coverages from five to three years.  Due to the unpredictability of the future, I am trying to make a decision to keep only one of our policies or drop both of them now. The longer we hang on, the more money we will lose.

A. Insurance is a service, not an investment, and you should expect to “lose money” on it. That said, the jury is still out on the viability, affordability and suitability of long-term care insurance as a risk mitigation tool. It’s impossible to evaluate it reliably since there is no way to know what the costs will be, in advance. As I’ve been saying for years, if it won’t be affordable at twice the price, then you should be reluctant to carry it. That’s as close as I can get to one-size-fits-all advice. The decision about whether, or not, to continue to carry the insurance is complex and must be considered on a case-by-case basis.

In considering how to proceed, you should ignore the money you’ve already paid in premiums. You have no equity in the policy and the past premiums are a “sunk cost.”


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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