Is Buying Term Life Insurance Worth It? | | The Motley Fool

After a lifetime of hard work, you’re ready to enjoy your best years and live life to the fullest – all without the hassle of work drama or important dates. If everything goes according to plan, you will live a happy and healthy life.

However, a lifetime of experience will probably teach you that things don’t always go according to plan. Even if you are in good health now, things can change, and you may need long-term care in the future.

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Do you need long term insurance?

According to AARP, it is estimated that nearly three out of four seniors will need long-term care as they age. Of those, a quarter will spend at least $50,000 in savings over their lifetime. Others charge much more – nursing homes can cost more than $150,000 a year.

Suffice it to say, this money is huge. Unfortunately, they are not covered by Medicare, which is why you may want to consider purchasing long term insurance to reduce these costs. Long term care insurance is offered by companies like Genworth Financial’s opinion or MetLife and pays for housing, nursing care, home care, and elder care.

However, term insurance alone is very expensive. For example, ConsumerAffairs reported that for a 65-year-old man with certain health conditions, the annual premium could reach $2,100. For women of the same age, the salary is more than $3,100 a year.

In exchange for these future payments, your hypothetical plan would pay out $400,000 at age 85. If you needed long-term care, your plan would add only $160,000 — not enough for a year’s worth of nursing home care.

Do the math before you buy

Remember that your insurance policy will remain active if you pay your premiums every year. If you start paying at age 65 and don’t need long-term care until you’re 85, you’ll have paid your long-term insurance premiums for twenty years before you use your policy.

So far, you will have paid more than $42,000 if you are a man, and $62,000 if you are a woman. If you need long-term care at a higher level for the last few years of your life, the costs can pay off.

However, it is possible that you will not encounter any cost. In fact, the United States Department of Health and Human Services estimates that 63% of retirees are expected to spend $0 on long-term care costs over the course of their lifetime, either because they may not need long-term care or because they have access to replacement care provided by family members or loved ones.

With this in mind, it may be worth considering what happens after you save the money you would have paid earlier. Assuming you save $2,100 a year and invest it — achieving 7% compounded annual growth — you’ll have more than $86,000 after the same 20 years between ages 65 and 85.

If you save $3,100 a year instead and add to it at the same rate, you’ll be left with more than $126,000, enough to cover a large portion of your long-term care expenses — if that’s possible.

To insure or not to insure?

Long-term care is expensive. But so is term insurance – so you might be better off saving and investing that money instead of spending it on insurance premiums.

Long-term care insurance may make sense if you expect to be among the small group of Americans who will receive large amounts of long-term care. But many retirees who face out-of-pocket expenses that fall below the lifetime cost of insurance payments can be better served by paying for care themselves.

By carefully considering your options and evaluating your health, family, and financial situation, you will have a stronger idea of ​​how to plan for your medical needs in old age – long term insurance or not.

Stupid helper Ryan Wed has no responsibility in any of the matters mentioned. The Motley Fool has no position in any of the listed products. The Motley Fool has a disclosure policy.