Taking emotion out of the decision.

Much has been written in financial planning periodicals regarding the pros and cons of long-term care insurance, perhaps because it is still in its infancy compared to other insurance products. While most individuals don't question the need for homeowner's, automobile or life insurance, many are still reluctant to purchase long-term care insurance. Why? Possibly because what the insurance is intended for and how it is presented evoke fervent emotions.

Many people find it difficult to contemplate a loss of independence and their own mortality They might assume that Medicare or Medicaid will pick up the tab but haven't reckoned on Medicare's limits on length of stay in a skilled nursing home and restrictions on intermediate care and in-home services, or on Medicaid's eligibility requirements of low income and few assets.

It may benefit the potential purchaser of long-term care insurance to take the emotion out of the decision by thinking of it as an asset protection policy. Each of us chooses which risks we are willing to accept and which we wish to pay an insurance company to take on for us. It is always a personal decision. The owner of a long-term care policy is deferring the risk of a future m-home or skilled nursing facility cost to an insurance company rather than accepting that risk personally.

At today's level of health care costs, assets accumulated over a lifetime can disappear in a few years should the individual need skilled nursing care. According to the latest annual survey by the Metlife Mature Market Institute, the average private-pay cost of nursing home care in 2007 was $213 per day, or $77,745 per year, for a private room and $189 a day, or nearly $69,000 per year, for a shared room. Some places, such as San Francisco or Hartford, Conn., reported costs of more than double the national average. Moreover, costs have been increasing faster than the rate of inflation and could further accelerate if the number of beds doesn't keep pace with an aging population. Between 1995 and 2025, the number of elderly people will double in 21 states, according to the U.S. Census Bureau.

Healthier lifestyles and advanced medical care are allowing many people to live longer but with a greater chance that they will need assistance in their later years that family or friends are not equipped to provide physically, emotionally or competently.

Consider that a $5,000 annual premium for a good individual long-term care policy is 1% of $500,000, or 0.5% of $1 million, or 0.25% of $2 million, etc. Isn't it worth one-quarter of 1% per year to ensure that an individual's estate tax exclusion, currently $2 million, is protected and can be distributed upon death in any manner that individual has planned? Isn't it worth the peace of mind to know that a lifetime of work and saving will be preserved to benefit future generations?

Theodore J. Sarenski, CPA/PFS, CFP, is the founding member of DB&B Financial Services LLC in central New York state and is chairman of the AICPA Eldercare/PrimePlus Task Force. His e-mail address is [e-mail].