Ask an Advisor: We Pay $500 Monthly for Long-Term Care Insurance and Have Paid $72k. Should We Keep It?

Ask an Advisor: We Pay $500 Monthly for Long-Term Care Insurance and Have Paid $72k. Should We Keep It? SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below. My wife and I bought long-term care policies 25 years ago when they were relatively cheap. Now, our premiums have increased for the third time to over $500 per month and will rise again in six years. I figure I’ve already paid about $72,000 in premiums. Now, in our late 70s, I’m trying to decide if I should accept the increases or cancel the policies. What do you think? – Robert Nobody likes paying higher premiums and it can be frustrating watching them increase. However, just like it was when you initially decided to purchase the policy, the issue at hand is still whether or not you need and can afford the coverage. (And if you need help planning for your long-term care or saving for future expenses, consider speaking with a financial advisor.) Sunk Cost of Previous Premiums Before we address the question directly, let’s talk about the $72,000 you’ve paid up to this point. I’m not sure if you’re suggesting that you should keep going or stop because you’ve already spent that much, but it shouldn’t affect your decision either way. Those prior premiums are sunk cost, and the insurance coverage they bought you is in the past. It’s no different than the $10 you spent on yesterday’s lunch. The Value of Insurance Going Forward The real question is whether or not you still need the long-term care insurance, and if the coverage provided by your policy is worth $500+ per month. I think there are two big concepts at play here that you should consider as you think about your decision: your age as well as your resources and goals. Your Age The first is your age and the likelihood of needing long-term care. It’s a few years old, but this Morningstar article discusses some relevant long-term care statistics that I think illustrate what we all intuitively know. The odds of needing long-term care go up as we age. The data from 2018 shows the percentage of people who end up needing long-term care: - 8% of people between 65 and 74 years old - 17% of people between 75 and 84 years old - 42% of people 85+ So, unlike the premiums you’ve already paid, the days for which you’re more likely to experience a long-term care need are in front of you. (A financial advisor can help you prepare for future expenses, like long-term care.) Your Resources and Goals Although it certainly speaks to it, the fact that you’re more likely to require long-term care in the future doesn’t necessarily mean you need long-term care insurance. Depending on how your investments have performed and what you’ve spent over the course of your retirement (assuming you’re retired, you may not be) your account could have grown sufficiently large that self-insuring makes sense. I don’t know that of course, just pointing out that it’s possible. If it hasn’t, then your decision is a pretty easy one in my opinion. Provided you can continue to make the premium payments then it’s probably best that you do.