The long-term care insurance (LTCI) debate is chock-full of misinformation. Frightening statistics on nursing home care abound: The costs are huge, the odds are high. It apparently adds up to one conclusion: The long-term care decision is critical to avoiding bankruptcy in your retirement. At least, many financial planners and insurance salespeople would like you to think so.
Here is the typical sales pitch: “Long-term care is expensive. Most people will need it. Buy insurance and you’ll have no worries.” It sounds compelling, until you dig into the details.
LTCI does have some benefits. It can leverage your money for certain health care scenarios. But, according to my analysis, that leverage is on the order of 2-3x, not the more extravagant ratios sometimes claimed by insurance agents. And, as I’ll shortly discuss, LTCI does not protect you from the worst-case scenarios, nor does it remove every worry in other scenarios.