The Sunk-Cost Tragedy of Long-Term Care Insurance

Why paying $5,000 a year to protect a hypothetical inheritance is a losing mathematical bet.

Your parents have paid $450 every month for the last twenty-two years to a company that hopes they die quickly in their sleep. It is called long-term care insurance, and right now, it is likely holding your family's financial plan hostage. The premium just went up another 35 percent, and your 78-year-old mother is determined to keep paying it because she 'doesn't want to lose everything she put in.' This is the sunk-cost trap, and it is costing families hundreds of thousands of dollars in real money to protect a hypothetical inheritance that may not even exist by the time the dust settles.

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