Care insurance good for single women

Q: I am 60 years old. My financial adviser is strongly urging me to buy long-term-care insurance (before September, when Genworth is raising its rates).

My mortgage is paid off (home value: $325,000). My investments and retirement portfolio stand at $350,000. My income is $35,000 with minimal liquid cash. I plan to work indeterminately and am healthy, though I will need to buy health insurance upon "retirement."

Though I understand the benefits of LTC, it's difficult to part with hard-earned money, acknowledging it's going nowhere until when and if it's needed.

I've found it difficult to research this subject. Financial advisers and insurance companies naturally want you to buy this product; others advise selling your home at the crucial point. I'd appreciate your thoughts.

A: The best candidates for long-term-care insurance (LTC) are single women like you. You are likely to live long enough to need long-term care. More important, you don't appear to have alternatives to institutional care — such as a daughter who lives less than an hour away.

This is the dilemma millions of women face as they age. So I think you are a good candidate for this insurance, despite doubts I have expressed about LTC insurance in the past.

Another way to think about LTC insurance is to consider it as "portfolio insurance" on your net worth.

With your net worth of $675,000, a policy that cost $2,500 a year would cost about 0.37 percent of your net worth a year. It would provide you with some assurance that you won't go broke, and even a three-year coverage period would allow plenty of time for an orderly liquidation of assets in the event you needed more than three years of care.

Preserving assets, of course, is important only if you want to leave some money to children or charity.

Just remember that when establishing limits on the policy, you will have income from other sources — so the policy doesn't need to cover the entire cost. Do get inflation protection.

And, finally, don't take all the sweet talk about "home care" as an alternative to institutional care too seriously.

This is a powerful marketing tool because no one — absolutely no one — likes the idea of paying money to insure for the privilege of staying in a nursing home.

But if you examine your policy closely, you'll find that you don't qualify for coverage until you can't perform several of the five Activities of Daily Living (ADLs).

When this happens you'll probably need more than an eight-hour visit from a nonnursing person every day of the week. A nursing home is likely to be the most workable solution.

One alternative that you may not have examined is the idea of moving to a continuing-care community (CCC) when you are somewhat older.

These communities offer care that ranges from independent living with some community meals (no more cooking!) to assisted living and nursing care — all in one facility.

Because you enter before you are disabled, these communities offer a broader network of supportive peers as well as professional care.

Questions about personal finance and investments may be sent by e-mail to scott@scottburns.com or by fax to 505-424-0938. Questions of general interest will be answered in future columns.