Q: As a single woman, I lost my job at age 59 last year. I am in good/excellent health. My family's genes are highly favorable to my having a long life. Two years ago, I bought a long-term health insurance policy, which costs me over $5,000 a year. I am considering canceling it and putting the premium money in a separate account as a better investment. Do you think it is a wise idea?
A: No. Though I am not a licensed financial counselor, I believe you would put yourself at risk and out of your comfort zone. You have the ability to pay the premiums, but you have no guarantee that you will remain healthy, not have an accident that might disable you or some other unfortunate surprise.
Above all, if you cancel and want to renew your policy, you may not qualify and if you did, the premium would be higher because you're older. Coverage and waiting periods may also be lengthened.
The primary reasons individuals buy long-term policies are: they wish to maintain their independence, protect assets and knowing Medicare payment has its restrictions, (now under review) they fear burdening their children. Also, your costs are probably tax deductible.
Research has shown that at age 65 one out of two women has the possibility of living in a nursing environment. For men, it is one of three possibilities. Women live longer!
Nursing home yearly prices vary from about $35,000 to $100,000. An Alzheimer's patient for eleven years, my friend's relatives spend over $60,000 a year taking care of him.
Fortunately, he has a long-term policy.
Although my wife and I squeezed our budget to buy coverage, a major selling point our agent made was that even if our policy only paid a half of the actual cost it could literally be a financial lifesaver.