(617) 332-5901
senior woman and healthcare worker

The question of whether or not to self-insure for long term care costs is a popular one.  

The answer is deceptively simple:

Someone can self-insure the cost of long-term care if they have enough unearned income – and/or assets they can sell and are willing to sell – to cover the cost of a multi-year need for long-term care at the time that care is needed. Typically this will be many years into the future.

Here are some important considerations:

  1. First, determine the cost of long-term care in the desired setting. It’s not unusual for care to run into 6 figures, even in today’s costs.  
  2. Assets that may possibly be available to be liquidated for care may also be earmarked for other uses.  Typical uses include passing along to heirs or donating to favorite causes.
  3. These same “assets available for care costs” may be expensive to sell.  Early surrender or tax penalties can make this type of long-term care planning quite expensive. In addition, if the assets are real estate, buyers who know they are being sold to pay for care costs may demand a discount price – especially if real estate happens to be depressed when cash is needed.  Stock asset value can be up or down, depending on the market.

Finally, in considering whether or not to self-insure, it makes sense to examine your overall risk tolerance.  It’s often said that the wealthy get rich by risking other people’s money.

Do you insure every piece of jewelry or art in your possession?  Do you still carry collision on your car – even though the value of it could be easily replaced if needed?  How about the house?  Are you insuring the pennies and letting the pounds remain foolishly uninsured?

This might be a great time for a comprehensive review of all of your insurance policies, from life and disability to homeowner’s and all liability. The goal? To ensure which of your insurance premium dollars are being spent wisely, and which (if any) risks are uninsured.

Uninsured is, in fact, just another way to say self-insured.

Long-term care insurance should be considered with the same approach of any other significant risks that would result in considerable costs.

Since 2003, Meredith Pensack has helped close to two thousand people protect their retirement portfolio as well as their families. Meredith specializes in Long Term Care insurance solutions, including hybrid options that combine either life insurance or an annuity.