Are you wondering if your clients should buy long-term-care insurance?

A good rule of thumb is that if a couple can afford to run two households they can afford to self-insure, according to David Keator, an advisor and partner in the Keator Group in Lennox, Mass.

That is because having one spouse in a nursing home effectively doubles the cost of housing and care for the couple.

“The cost of private nursing home is about the cost of running a household,” he said. “It takes about $2.5 million of assets to pay privately for nursing home as well as take care of the spouse who’s not in the nursing home. If a couple has less than $2.5 million, it becomes more important to review a long-term-care policy because they don’t have the capital to generate enough income.”

The rule doesn’t apply to single people who can help cover the cost of a nursing home by selling their house. Because they can include the value of their real estate, a single person would need less assets outside of their house to self-insure.

“A single person with Social Security and a pension would need a net worth of about $1M including their home to self insure for health care,” Keator said. If the person did not have social security and a pension, then they would probably need $2 million.

It’s also different if the client doesn’t care about leaving money to heirs because after the client runs out of their own money, they can go onto Medicaid. It helps to start off paying for yourself, however, Keator said.

“While it’s not supposed to be that way, we see the reality is that if you can private pay for nursing home care in the beginning you can usually get into a nicer place,” he said.