Do you need long-term care coverage?

My husband and I are only in our early 30s, but we’re still interested in the idea of long-term care. This is mainly because we’ve already decided that we don’t want to live in our own home as we age; we’d rather live in a retirement community, particularly those that offer some sort of assisted-living services.

However, we know that living in such communities can get expensive — especially if some sort of care is needed. Indeed, according to what I read in Consumer Reports Money Adviser, the cost of living in an assisted-living facility is more than $2,400 a month at the low end. At the high end, it can be more than $5,700 a month.

A long-term care policy might help with that, but can you rely on it to be there when you need it?

Problems with Long-Term Care Insurance Policies

Money Adviser points out that there are problems arising in the area of long-term care. One of the issues is that the current low-rate environment makes it difficult for insurers to build up the kind of reserves they need to make good on policies. With people living longer, this situation isn’t exactly a positive one for insurance companies that want to make profits.

So, many of the insurers that offered long-term care insurance are no longer providing those policies. And those that still do offer long-term care policies are raising premiums. By a lot.

If you’re looking to buy a long-term care policy, you could be in trouble; you might get stuck with huge premiums. While there are some companies that will refund part of your premium if you don’t end up needing long-term care, for the most part, you’re stuck. And, if your premiums rise and you can’t afford them, you either have to scale back your coverage — or cancel the policy, possibly losing all the money you’ve paid in over the years.

Even hybrid policies that combine life insurance coverage with long-term care coverage may not be the best choice. Indeed, those can be even more expensive in the long run than a regular long-term care policy, depending on the benefits you can expect.

What Should You Do Instead?

Consider your options. Look at your retirement situation. As you figure out how much you’ll need in retirement, consider the cost of long-term care. Realize there are some situations where Medicare won’t cover your long-term care, so don’t rely on that program to keep you solvent. If you plan carefully, there won’t be a need to buy a long-term care policy — because you’ll have arranged for the cash flow you need during retirement.

The first step is saving up, and using your retirement investment accounts to build wealth. But you can also look for ways to generate regular income during retirement, through an income portfolio, rental properties, a business, or some sort of online venture. You can also consider saving up enough to buy an annuity that will pay you enough to cover your long-term care costs. (Be careful, though. Annuities aren’t for everyone, and they have their own problems.)

Don’t assume that long-term care insurance is the way to go. Consider your individual situation, and plan ahead. You can’t count on long-term care insurance to cover all your bases.