| Constructing Your Insurance Safety Net |
| As with most things in life, insurance coverage usually starts simple and gets more complicated. Not so long ago, my insurance needs were pretty basic. But these days, with more responsibilities and more stuff, my husband and I seem to wrestle with one insurance dilemma after the next. |
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| Whole life or term? What about an umbrella policy that will protect us if someone slips on the front walk and decides to sue? And how much should we allot for contact lenses in my flexible-spending program at work? |
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| And there are often other factors we need to think about when planning for insurance. We're all living longer these days, so we must take greater pains to ensure our well being into old age. And there are more specific issues relating to divorce, disability, and how to take care of your kids if something should happen to you. Not very happy subjects, mind you, but important ones. |
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| Investigate long-term care insurance. Because we're all living longer (and women generally outlive men), there's a good chance many of us will face long-term care costs. Sue Stevens, Morningstar's resident certified financial planner, says she thinks many baby boomers, in particular, are in denial about the realities of growing old and the planning that they need to do. "They have a vague idea they should do something to protect themselves," she says, "but most haven't taken the time to investigate their options." |
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| While health insurance and Medicare cover short-term illnesses and hospital stays, they generally won't pay for nursing-home care. Even relatively short time periods spent in a nursing home can quickly deplete a lifetime of savings, thereby cutting into what you might leave to your heirs. Buying long-term care insurance not only protects your nest egg, but also gives you more leeway in selecting a type of care that suits you. An insurance policy might enable you to afford in-home care, for example. Stevens says that long-term care insurance also takes a big burden off of children and spouses, who might otherwise feel obligated to provide nursing care themselves. Giving care to an elderly or disabled relative can exact a terrible emotional toll, something most of us wouldn't wish on our loved ones. |
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| So what's the downside of long-term care? For one thing, it isn't cheap. As is generally the rule with insurance products, the more likely you are to use the coverage (and you're very likely to need long-term care at some point in your life), the more expensive it is. But the earlier you buy in, the lower your premiums will be. Whereas such insurance has often been recommended for people at age 60 or so, Stevens says she would recommend that women consider obtaining coverage in their 50s, when the premiums are more reasonable. You'll also want to opt for long-term care insurance with inflation protection, because care that costs $125 a day now will likely be significantly more expensive 10 years from now. |
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