Suze Orman offers unapologetically blunt advice about why you and your family might want to consider long-term care (LTC) insurance. Suze learned the hard way how much years of long-term care can cost through an experience in her family. She is convinced that, even with the problems the LTC policy industry has experienced over the years, you should take a look at this type of coverage. Here is a summary of some hard talk from Suze Orman about long-term care insurance.
A Two Million Dollar Mistake
Suze tried to get her mom to sign up for an LTC policy, when her mom was young enough to qualify. Suze offered to pay the premiums, but her mother refused to sign the application. For the last seven of her mom’s 97 years, Suze shelled out more than $20,000 a month for her mother’s assisted living and specialized aides. Thankfully, Suze could afford to drop more than $2 million on her mother’s care. Not many of the rest of us could afford this astronomical expense.
Suze knew how expensive long-term care can be, which is why she pleaded with her mother every year to let Suze buy LTC coverage for her. She saw people lose their life savings paying for home health care or the nursing home. It is particularly sad, when the expenses for one spouse gobble up the retirement savings, leaving the surviving spouse broke.
Do the Math
The premiums for LTC coverage have increased dramatically. A policy that initially cost $2,000 a year, might cost $4,000 a year now. Before you walk away from LTC coverage, think about what you get for that increase in premium.
Home health care will cost, on the average, $4,000 a month. Nursing homes can cost $8,000 a month or more. An entire year’s LTC premium costs only one month of home health care or two weeks of nursing home costs. The expense of living in a nursing home for one year is more than the total of all the premiums a person will ever pay for LTC coverage.
There is no logical reason to believe the cost of home health care or long-term care will decline over the coming decades, when you or your loved one might need these services. If you decide not to buy LTC insurance and just cross your fingers and hope for the best, you need to realize the costs you might have to pay out of your retirement savings could be significantly higher than the current average costs of home health care and nursing homes.
Of course, if the trends continue, the premiums will continue to increase. Suze recommends people only buy an LTC policy today, if they can easily continue to pay the premium if it increases by 40 percent over the coming years.
You should not buy an LTC policy if paying those premiums will mean you cannot afford to save money in your retirement accounts. LTC coverage only pays a benefit to people who need home health care, nursing home, or another form of covered long-term care. Your odds of living to retirement age are far greater than your odds of needing long-term care.
The general law of this article might differ from the regulations of this article. You should talk to an elder law attorney in your area about whether LTC insurance would be a wise addition to your estate planning. This article is not an attempt to sell LTC insurance or any other type of insurance.
AARP. “Plan for Long-Term Care.” (accessed June 12, 2019) https://www.aarp.org/retirement/planning-for-retirement/info-2018/longterm-care-suze-orman.html