by Archie M. Richards, Jr., CFP^®
June 27, 2005

If your liquid assets amount to less than several million dollars, you probably need long-term care insurance.

With medical science advancing like gangbusters, Americans are getting older. But when you get old, you need care.

Here's the hooker: Someone has to provide it.

Time and time again, caring for someone who's chronically ill makes the caregiver chronically ill. Caregivers often die first. People go to a nursing home only when forced to, because the caregiver breaks down.

Providing care can tear a family apart. If there are four siblings in your family, will each one share a quarter of the burden? Fat chance. The responsibility for caregiving is often shared unequally, causing tension among siblings,

Let's say you live near your father and provide him with considerable care. Your sister lives thousands of miles away and provides none. Having a hard time herself, she supplies no financial help. When your sister comes to see your father, it's a big day for him. He's just delighted to see her.

You're with your father on bad days as well as good. Seeing you is nothing special. He sees you all the time.

You're exhausted. You're financial challenged, and you're ticked off.

Living a long life is likely, planning for it a necessity. The failure to plan introduces emotional and physical ill-health to the entire family. Obtaining long-term care for yourself has more to do with your family than with you.

Long-term care insurance is the answer. But don't buy it for you. Buy it because you love your family. Buy it because you don't want the person who provides your care to sicken with exhaustion and die first. Buy it because you don't want your children to stop talking to each other. Buy it because you don't want the people you love to have to change your diapers.

Long-term care insurance introduces professional support that allows members of your family to provide better and longer care for you without tearing your family apart. It pays for services children find the most difficult and embarrassing to perform. Family members can provide whatever care they want.

Here's how long-term care insurance works: You pay premiums, and the insurance company accumulates a pot of money from which it later pays for your care.

The more premiums you pay, the larger the pot. You have to strike a balance. Here are potential premium savings:

• Arrange to receive care at home as well as in a nursing home. Fully 89 percent of care is provided at home. Not occupying a nursing-home bed costs less.

• Agree to pay with your own money for the first half-year (or even full year) after you become incapacitated. The need for the insurance company to dip into the pot of money is delayed, cutting your premiums up front.

• Arrange for the insurance company to pay for your care for only 5 years (or even 3 years) instead of for life. Most nursing-home patients die within 2 years. Again, a smaller pot of money is needed.

• The sooner you buy the policy, the lower the premiums.

• Assuming that inflation will raise the cost of care by 5 percent a year, as many policies offer, increases premiums significantly. You might drop this provision or assume a lower inflation rate. I expect general inflation to disappear in the next decade. The cost of skilled nursing care will probably continue rising for longer, but not at 5 percent indefinitely.

Life insurance, as you know, protects your family against your dying too soon. Long-term care insurance protects your family against your not dying for a long time, incapacitated.

Talk with a financial advisor about long-term care insurance. Keep your family from breaking apart.

Are real estate prices in a bubble?

No. America's elite 1) fear high prices, 2) expect substantial declines, and 3) holler about a bubble. Under these circumstances, there is no bubble.

In real bubbles, such as Japanese stocks in 1989 and U.S. high-tech stocks in 1999, the elite climb on board. Books proclaim, "Never mind the high prices; things are different this time." Those are the markets to fear.