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Is long-term care insurance necessary?

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Another study doesn't distinguish between the sexes, but estimates that less than 40 percent of 65-year-olds will require the services available in an assisted living facility or nursing home, and most of them will stay less than two years.

No wonder boomers are slow to hop on the long-term-care train.

Even though insurance agents will urgently impart that consumers should purchase LTC while they're still healthy, it may be wise to hold off. Since the market isn't responding to carrots or sticks, insurance companies are scurrying to design products that are more palatable to consumers.

An interesting product offered by the aforementioned Lincoln Financial Group, as well as other insurers, is a hybrid life insurance policy with long-term care benefits. If the retiree doesn't use the long-term care benefit, his or her beneficiaries get the death benefit. If the retiree does use a portion of the benefit, the heirs get anything that remains. Be sure to read all the fine print and study the policies carefully before signing up, though.

Over the next few years, the insurance industry will likely come up with other creative solutions.

Alternatives to insurance
The conventional wisdom is that you need long-term care insurance if you have between $500,000 and $2.5 million in assets. If you have more than that, you can self-insure, and if you have less than that, you may not be able to afford the insurance premiums.

If you're 50 years old and currently have $500,000 in assets, they can grow to $1.5 million by the time you're 65, assuming an 8 percent rate of return. They can balloon to more than $2 million if you average a 10 percent return. In the meantime, you can keep piling money into your 401(k) plan and forget about buying long-term care insurance altogether.

Chances are much greater that folks older than 65 will need some help later in life but not necessarily a stay in the nursing home. For those who need assistance, there's always the option of hiring someone, preferably a family member. If the family lives far away or is nonexistent, seniors can tap other resources in the community that enable them to live with dignity in their own homes.

For instance, seniors who need help with paying bills may consider hiring a daily money manager. Or those who need help with basic daily activities may contact a geriatric care manager to assess their needs.

The National Association of Area Agencies on Aging is a great starting point for seniors or their caregivers to search for a wide range of in-home services. From there you can tap into the eldercare locator to find out about the services offered in your own community. For instance, the 211 hot line in the area where I live and work offers a ton of assistance.

My goal is to live a fulfilling healthy life, decline quickly at a ripe old age and die suddenly in my own home. Of course, things may not play out this way. But purchasing long-term care insurance is a not an easy decision since the coverage it offers may not protect against financial mayhem at all.

I'm putting the decision off for a few years, in part because I'd rather not add to the profits of the insurance industry by parting with even more of my money. I'd rather feather my own nest.

Longtime financial journalist Barbara Mlotek Whelehan earned a certificate of specialization in financial planning. If you have a comment or suggestion about this column, write to Boomer Bucks.'s corrections policy-- Posted: Jan. 17, 2007
More stories by Barbara Whelehan
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