It happened again. Another well-respected financial journalist gave bad advice about who needs long term care insurance–and, more importantly, who doesnt. This is getting to be a problem.
Heres what was written: If you have less than $500,000 in assets, you cant afford LTC insurance. And, if you have $1 million (single) or $1.5 million (couple), you dont need LTC insurance since you can afford to pay for the care you require.
As if the bad advice in the original publication wasnt damaging enough, I read about the advice in an electronic magazine that regurgitated the bad advice to its subscribers, hailing it as a “particularly important point.”
This kind of thing keeps happening, and it will likely happen again, because consumers love advice like this. It takes a complex topic and makes it simple. Dangerously simple. Theres no mention of whether these numbers include the value of your house. Theres no discussion of how the liquidity of your assets affects the LTC insurance buying decision.
Asset guidelines are dangerous from many points of view. For example, the cost of LTC varies tremendously across the country, making absolute guidelines look silly. A semi-private room in a nursing home varies from $74/day in Tulsa to an average of $321/day in Anchorage (according to the MetLife Mature Market Survey on Nursing Home and Home Care Costs 2002). That means insurance designed to cover this expense would cost more than four times as much in Anchorage than in Tulsa for the same person.
Who says that someone with assets of less than $500,000 cant afford LTC insurance–especially if they live in Tulsa?
The number one question CPAs ask in my training classes is: How much money do people need before they dont need LTC insurance? I usually play devils advocate and say: “Its about the same amount they need to have so they dont need to buy Medicare supplement insurance or homeowners insurance.”
Then I ask, “At what level of wealth would you tell your clients to cancel those other coverages?”
That seems to make the point clear.