There are two types of people in this world: Those that divide the world into two types of people and those that don’t.
When it comes to paying for long term care, they say there are two types of mistakes. There are people who insure against the risk and never need it. That’s known as the “Little Mistake.” Then there are those who don’t insure against the risk and wind up needing it. That’s known as the “Big Mistake.”
Let’s examine this closer. When it comes to long term care, either you are going to need it, or you won’t.
For those who will need care, some will pay in advance for protection and others will hold off buying protection, choosing to pay for their care using their assets. That's called "Estate Planning by default."
For those who pay for protection, some will do it to protect the financial independence of their spouse, while others will buy some type of long term care insurance to retain assets for their beneficiaries. For those who buy long term care insurance, some will die before the insurance kicks in and others will use some or all of the insurance.
For those who will never suffer through the need for long term care, some will have already purchased long term care insurance. They, or their children, may later say they would have done better stuffing the cash in a pillow case.
Avoiding the regret from buying long term care insurance and never needing it, is why the insurance industry has developed new products offering Living Benefits so no one has to make such a difficult choice. (See Understanding Living Benefits)
- Some of these products pay sit on a pool of money that will go to family if there is no long term care need or increase in case there is such a need.
- Others will pay a retirement income that will increase should a long term care need arise.
- Others will pay a life insurance death benefit of whatever was not consumed for long term care.
The days of choosing between the “Big” and the “Little” mistakes are over. Now we can deal with "getting sick along the way" without putting our other planning at risk.
(What other planning? See Live too long, Die too soon, or Get Sick Along The Way.)