Don't Insure On A 1% Chance

Terri and her husband are considering long-term care insurance. They are 54 and 56 years old. Should they go ahead and purchase it? Dave recommends against it.

QUESTION: Terri in Oklahoma and her husband are considering long-term care insurance. They are 54 and 56 years old. Should they go ahead and purchase it? Dave recommends against it.

ANSWER: You were advised to buy it by someone who sells it. Hello? There’s a conflict of interest. The truth is—if you actually do a little bit of research—you will find that there is less than a 1% chance of someone under 60 spending time in a nursing home. I don’t insure on things that are less than a 1% chance. So no, I don’t think it’s a good idea.

When you’re 60, the probabilities go up almost every day. I recommend at 60 years old—on your 60th birthday—that you start shopping for long-term care insurance, regardless of your income and regardless of your assets. Nursing home care is $30,000 to $50,000 a year. That will crack and scramble a $300,000 nest egg in just a couple of years. You do want long-term care insurance. You do not want it, though, until you’re 60. I don’t recommend it until then.