Making Cents: Many need long-term care insurance

John P. Napolitano

Long-term care insurance is one of the most widely misunderstood financial products in America. In my experience, only a small percentage of the population that should own long-term care insurance does own it.

Long-term care insurance is for illnesses or disabilities that last longer than three to six months.

If you have very little in the way of liquid or investable assets, then you can probably avoid owning it, provided you are willing to accept Medicaid level care should you ever need long term assistance.

Some argue that the very wealthy do not need the coverage, and I'm not sure that I agree with that. The very wealthy could afford to live without much insurance, but they do choose to transfer those risks to an insurer. I view long-term care insurance as overdraft protection on your health insurance plan, and that you should own it if you can afford it.

With long-term care insurance, you buy a specific benefit in terms of dollars per day or per contract. The amount of the benefit can vary widely based upon one's individual needs. The needs may be to prevent an impairment of the lifestyle of a surviving spouse, or to guarantee a high level of quality care for the insured.

In addition to the basic policies for long-term care, there are a few other creative ways to purchase the coverage. One of the latest offers from insurers is a policy combining life insurance and long term care policies. I like this option because one of the biggest objections to owning long-term care insurance is the notion of paying for something that you may never use. With the life insurance element, there will eventually be a death benefit paid to your beneficiary.

Another creative way is to purchase traditional long-term care insurance with a return of premium rider. If the insured passes away with unpaid benefits from the LTC policy, a designated beneficiary will receive a check to refund all premiums paid on the contract. Naturally, the premium for this rider increases the cost of the coverage, but this is yet another way to alleviate the guilt of paying for something that you never got to use.

And lastly, don't forget Uncle Sam. Premiums paid for some long-term care policies may qualify for a federal tax deduction. Some states even offer tax incentives for long-term care insurance ownership.

John P. Napolitano is the CEO of U.S. Wealth Management in Braintree, Mass. He may be reached For online discussion and more information, go to