Suze Orman Explains the Value of Long-Term Care Insurance

En español | My mama lived to be 97 years old. I was blessed to have the means to make sure she had the best care. But I am so very aware that the $20,000 or more a month I spent for her assisted living and special aides during the last seven years of her life is a huge sum of money that most households could not cover.

What was so sad is that when my mom was still eligible to get long-term care (LTC) insurance, I tried every single year to get her to sign up for a policy. I told her, “Mom, I will pay for it. Please just let me do it.” And she’d say, “Suze, I don’t want you to waste your money. I am never going to need it.” She wouldn’t sign the application forms.

Over $2 million later, I can only wish she had listened to me. I am grateful I could keep my mom living a great life until her very last day. But this is not just about me and my mom. It’s about each of you.

Earlier in my career, when I was working as a financial adviser, I watched so many couples struggle with the massive expenses of later-life care. People who had saved so diligently saw their retirement accounts swallowed up when one spouse needed care, either at home or in a nursing home. That often left the eventual surviving spouse in a precarious financial situation.

That’s why I’m such an advocate of LTC insurance. I say that with eyes very wide open to the fact that the LTC insurance industry has shocked some policyholders with steep premium increases over the years. Many insurers basically blew it when they first started offering these policies. They vastly underestimated the amount of money they would end up paying out to policyholders.

I realize anyone who has seen an annual premium jump 50 or 100 percent has every reason to be angry and frustrated. But I ask you to look at the big picture: If your $2,000 annual premium is now $4,000, what might that extra $2,000 a year buy you in future protection?

A lot.

The median monthly cost for a home health aide is over $4,000. A nursing home can cost $8,000 a month, if not more. And that’s just in today’s dollars. The cost will be higher in the years ahead.

I encourage everyone without LTC insurance to give it a serious look. The industry has learned its lesson. Current premiums now represent more realistic costs for insurers, which should reduce their need to ask for big rate boosts in the future. To be safe, however, you should purchase a policy today only if you can easily absorb a 40 percent premium increase over the years. I hope that doesn’t happen, but financial security is about planning for possibilities, not hoping for the best.

The bottom line: As with any type of insurance, you buy LTC coverage with the expectation that you’ll never use it. But if you do use it, the nursing home costs covered by the policy over one year will be greater than the sum of all the premiums you ever paid. Do yourself a favor—check out LTC insurance.