At What Age Should You Buy Long-term Care Insurance?

The specter of having a severe illness or injury that requires long-term care is a scary proposition for most anybody, not to mention the financial obligations you would face.

But trying to time when is the best age to purchase a policy is not an easy decision. Obviously, you don’t want to buy the policy too early and unnecessarily spend thousands of dollars on premium over your life for coverage you may not need until you are much older.

The younger you are when you buy a policy, the lower your premiums. That said, people typically do not purchase long-term care policies in their 30s or 40s since they are looking at a long time-horizon for when they would need to file a claim. After all, the policy may not be needed for 30 years or more.

At the same time, if you wait until you are in your late 60s or early 70s, the premiums may be cost-prohibitive for you – not to mention you may have trouble finding an insurer willing to write your policy.

For example, based on the “Genworth 2019 Cost of Care Survey,” if purchased today, a long-term care policy with a maximum daily benefit of $150 a day for three years would cost an estimated:

  • $2,004 a year for a man who is 55
  • $2,846 a year for a man who is 65
  • $9,603 a year for a man who is 75.

 

As you can see, the ideal time cost-wise is probably in your 50s and 60s.

But before pulling the trigger, you should think about how the premiums fit into your life and other obligations. If you have children who have not yet graduated from college, they will be your major concern. You should carry enough life insurance to see them through.

But after your children, if any, are on their own, you might take the funds you were using to pay for life insurance premiums and use them to finance long-term care insurance premiums instead.

 

What policies cover

Long-term care insurance covers:

  • Nursing home care
  • Assisted living facilities
  • Adult day care services
  • In-home care
  • Home modification
  • Care coordination

 

When shopping for a policy, you will have many choices to make:

The trigger – Policies will have a trigger for when payments can commence. Often, policies base qualification on cognitive impairment or the need for assistance in at least two activities of daily living (dressing, toileting, eating, transferring, bathing and continence).

Inflation riders – As you know, health care inflation is never-ending. While $150 may be sufficient to cover your cost of care today, that may not be the case in a decade or 20 years from now.

With long-term care insurance, you often have the option to buy an inflation rider with the policy, which will increase the allowance for daily benefits by a certain percentage a year, like 5% on a flat or compound basis.

But, you need to know that this type of rider comes with a price in increasing premiums. Some experts recommend that buyers aged under 70 purchase an inflation rider, while anybody older than 70 does not need to do so.

Elimination period – The elimination period is the time the insured must wait before the policy starts paying out. During that period of waiting, you will be on the hook for long-term care expenses. Typically, the waiting period is anywhere from one to 90 days, but it could be even longer.

The longer the elimination period, the lower the premium. That said, the premium savings you achieve by choosing a longer elimination period may not be worth it for you.

 

Don’t fall into the disclosure trap

One thing you have to be very careful about when applying for long-term care insurance is full disclosure about your pre-existing conditions or prior illnesses.

If you fail to tell the insurer about an illness, the company may refuse you coverage at the time you file for benefits. It’s in your best interest to be up front about your health, as you would rather be denied during the application process than have your claim denied after paying your premiums for years.

Why LTC Planning Is Essential for Boomers

As millions of baby boomers in the United States reach old age every year, experts predict the number of long-term care patients will double over the next 30 years.

What does that mean for you? It means that if you don’t have a long-term care plan in place, you and your family may have to face some tough choices down the road.

Read on to learn why a long-term care plan is critical for every baby boomer.

Americans are living increasingly longer lives. Recent estimates give a healthy 65-year-old man a 24% chance of living to at least 90, and a healthy woman a 35% chance of living that long. While this is great news, the longer we live, the more likely we are to suffer from a long-term care event.

This all means that now is the time to put a plan in place.

 

The hefty price tag

If you or a loved one suffers from an illness that requires long-term care, get ready for some sticker shock. A year-long stay in a nursing home typically can cost between $40,000 and $80,000, often more. While prices vary by state and the type of care required, one thing is consistent across the board when it comes to long-term care: it’s phenomenally expensive.

Just take a look at the average costs of various types of long-term care in the U.S.:

  • $5,566 a month for a semi-private nursing home room
  • $6,266 a month for a private nursing home room
  • $2,968 a month for care in an assisted living unit
  • $19 per hour for a home health aide.

 

These costs can quickly add up and eat away at your nest egg. For example, let’s say you hire a home aide to assist your husband just three times a week for four hours. At $19 an hour on average, that would come out at $228 a week. That adds up to nearly $12,000 a year. Unfortunately, Medicare does not cover these exorbitant long-term care expenses.

To top it off, informal home care is simply not a realistic option for most families these days. After all, most children of baby boomers are struggling to balance their own work and family life. They simply don’t have the time or resources to care for sick parents.

This is why it’s critical for each and every family to plan ahead for a potentially expensive long-term care event. Without the proper protection, such an event could devastate a family’s finances.

 

The simple solution: LTC insurance

How can boomers handle the skyrocketing costs of a potential long-term care event? The answer is simple: long-term care insurance. Without LTC coverage, a nursing home stay or another long-term care event could destroy your family’s finances.

Because LTC insurance covers many of these expenses, this valuable coverage will not only protect your finances ― it will also help you to maintain your current standard of living if you or your spouse requires long-term care.

 

The takeaway

Without LTC insurance, the cost of a nursing home stay or a home health care aide could wreak havoc on your finances and whittle away at that nest egg you’ve worked so hard to build. Don’t burden your loved ones with this kind of emotional and financial strain. Create a long-term care plan today to save your family a lot of heartache and stress tomorrow.

If you want to discuss your long-term care insurance options, call us. A professional can evaluate your unique situation and help you customize an effective plan.

A Reality Check Concerning Long-Term Care

Despite expected longevity increasing, more and more people will also need long-term care at some point in their life.

Most people prefer to create their own reality about long-term care rather than face the truth.

But, in the event of a long-term care need, it’s important that the family stays focused on the emotional and physical needs of the person needing care. Having properly planned for this eventuality with insurance coverage allows them to do so.

Many families assume that they will be able to handle the demands of long-term care on their own. What they don’t realize is that having the responsibility of being a caregiver has a major impact on your life.

The demands often cause people to give up jobs so they can devote the necessary amount of time needed to provide care. It can also drive a wedge between family members if a spouse becomes an absentee parent because they are spending most of their time providing care for their own parent.

That’s why it is so important to have long-term care insurance to provide suitable care without placing undue stress on the family of the person requiring the care.

While this makes sense in theory, many people are reluctant to purchase insurance because they don’t grasp the reality of long-term care costs and if they can pay for them.

Many people believe that they can pay for long-term care costs from their own assets. They think  that a reverse mortgage or stock portfolio can take the place of a policy. However, the cost of caring for an extended illness can easily wipe out one’s assets and bring a family to bankruptcy.

Some also falsely believe that long-term care is only administered in nursing homes. In fact, the majority of people receive long-term care today in their own homes or community based facilities, not nursing homes.

Depending on the policy, long-term care insurance can cover nursing home stays, home health care and community-based services.

And finally, many people believe they can rely on Medicaid for long-term care. However, the policy changes to the Medicare program mandated by the Deficit Reduction Act of 2005 have made fewer people eligible to receive benefits.

The safest course of action is not to wait and learn that your family member cannot qualify, but rather prepare for the future with a long-term care policy.

 

Comparing policies

When you are comparing policies, there are several factors to consider before making your decision:

  • The financial strength of the insurance company underwriting the policy.
  • The cost of care in your area, so that you can choose a daily benefit that will cover the needs of the person receiving the care.
  • The length of the benefit period. Since it is difficult to determine how long they may require care, many people choose policies with lifetime benefits.
  • The number of days the policyholder will be responsible for paying out of pocket before coverage begins. This is known as the elimination or waiting period.
  • The inflation protection provided by the policy. This feature ensures that benefits provided by the policy will be adequate to cover future needs.

How People Can Insure Themselves Against Outliving Assets in Retirement

 

In the United States, the average expected lifespan of humans keeps increasing as time passes. The average male born today can expect to live about 75 years, and a female born now can expect to live about 80 years. Research shows that people who reach the 65-year age mark are likely to surpass those life expectancy numbers. Men who are 65 can expect to live about 16 more years, and females who are the same age may expect to live about 20 more years. Research also shows that people who reach the age of 75 are likely to live past the age of 85.

Many people welcome the thought of extra years on their lives, but these added years can also bring several challenges. One important issue is for people to decide how they will support themselves financially. To ensure there will be enough money to pay the bills after leaving the full-time workforce, insurers suggest purchasing longevity coverage.

What Is Longevity Insurance?
This type of coverage is essentially an annuity that starts paying guaranteed monthly amounts at a later age. People typically pay one lump sum as the premium when they retire. However, they do not start receiving annuity payments until they turn 85. Between the time of retirement and that age threshold, they must rely on income from other sources. Some examples would be retirement savings, pensions and social security benefits.

When a person knows that he or she will have a guaranteed income source after annuity payments start, that helps relieve some of the worry of outliving retirement savings. If insurers offer this option, it is marketed as one that protects people against longevity risks or insuring their assets against the possibility of outliving retirement income. It is also possible to consider longevity coverage as a simplified form of planning for retirement income. People with this coverage know that at least part of their income will be available to them later on. The following are some important points to consider about longevity insurance:

– These types of policies’ premiums are usually paid in lump sums. If a person buys longevity insurance at the time of retirement, it is likely he or she will have to use some funds from retirement savings to buy it. People must consider whether their savings will be large enough to do this, and they must also know exactly how much they plan to put toward the purchase.

– Before receiving money back from the investment, a person must reach the annuity start date. As insurers perfect their products, many are adding death benefit features as options. This means heirs will receive something in return if the policyholder dies prior to the start date for the annuity. However, this reduces the monthly income that an initial premium payment would buy.

– Since a person is paying for something that will not be possible to use for 20 years, it is important to choose products carefully. Always work directly with an agent, and be sure to discuss all concerns prior to buying coverage.

Not all people who buy these policies will live until the age of 85, so there is no guarantee that benefits will be paid in such a situation. This should not deter possible buyers from purchasing longevity insurance, because companies offer this form of coverage for surprisingly affordable prices. For many people, this is the perfect addition to retirement income. Please call ACBI at 203-259-7580 or visit our website to learn more and to discuss whether this product is a beneficial option for personal needs.

Why it is Important to Start Shopping for LTC Insurance Now

 

There is an old saying implying that although people pay for long-term care insurance with money, it is ultimately their health that will truly buy it. This is because some preexisting conditions disqualify people from obtaining coverage. Those who are in good health should start the process of shopping for and obtaining long-term care insurance as quickly as possible. The majority of Americans have one or more health issues. These could be anything from anxiety and depression to hypertension or cancer. Even those who have health conditions may qualify for specific types of long-term care insurance, but it is best to discuss options with an agent who specializes in this type of coverage before making a decision. Professional agents have access to a wider variety of options to offer consumers.

Standards for health underwriting vary between insurers. They can also change from time to time, so it is important to work with someone who has expertise and will shop the market before submitting an application. This will help save time and money, and it will lower the chances of being declined for coverage. Good health can earn a person a preferred discount, which will save even more money. In addition to this, the discount is locked in, so it is not possible to lose the good health status and price break even if health issues change in the future.

Researchers recently conducted a survey that showed the percentage of applicants who qualified for discounts and the percentage who were declined. They concluded that it was best to start the shopping and comparison process at an early age, and they said people who are in their 50s should definitely start shopping if they have not started already. There are several preexisting conditions that can make it impossible to qualify. People who have any of these issues are usually wasting their time by requesting quotes:

– Individuals who use crutches, multi-prong canes, oxygen, wheelchairs or walkers.
– Individuals who need assistance with transportation, banking, using the phone or shopping.
– Individuals who require care in a nursing home, assisted living facility, adult day care or in the home.
– Individuals who need help with feeding, dressing, bathing, toileting, bowel continence, urinary continence and transferring between chairs and beds.

There are several specific illnesses and diseases that also disqualify people automatically from being approved for long-term care insurance. These include the following:

– AIDS or HIV
– Cystic fibrosis
– Alzheimer’s
– Dementia
– Hemophilia
– ALS
– Hepatitis C
– Paralysis
– Parkinson’s
– Schizophrenia
– Liver failure
– Muscular dystrophy
– Memory loss
– Kidney failure
– MS
– Cirrhosis
– PPS
– Lupus

When it comes to health and auto insurance, many high-risk individuals still have options but with higher price tags. Unfortunately, there are no other options for people with any of these disqualifying illnesses or conditions. Everyone should stress the importance of buying this valuable coverage before it is too late. Long-term care bills can pile up quickly and total into the tens of thousands in the span of several weeks. For those who are in relatively good health, now is the time to start shopping and planning on buying long-term care insurance. To learn what options are available, call ACBI at 203-259-7580 or visit our website.