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Is Long-term Care Insurance Worth It?
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Comments (10)Many people are unwilling to purchase long-term care insurance (LTCI) until much later in life—in their 80s rather than in their 50s, say—but a host of recent articles have been turning up in everything from senior care trade publications to small local dailies, which touch on the subject of the LTCI industry trying to welcome the burgeoning senior baby boomer market. LTCI is an idea many do not want to entertain, and yet aging and long-term care always will be an issue.
So What Is To Be Done?
Some naysayers speculate that it’s obviously in the insurance companies’ favor to have these premium payments rolling in. But to them we would like to point out that even with that being salient, LTCI—although possibly in wolf’s clothing—is still a sheep, because the consumer will pay less if insurance is purchased when they are still young and (hopefully) healthy.
So When Should You Start Looking into Your LTCI Options?
Over time, a LTCI recipient actually pays less—not just incrementally, but as a whole—because the premium is not only based on the age at which you buy, it is typically locked in from the beginning. Here’s an example from an upcoming article by Gilbert Guide’s CEO, Jill Gilbert, in Active over 50 magazine: If a healthy 55-year-old woman purchases an LTCI policy at about $1,500 a year, by the time she is 85, she will have only paid $45,000 for thirty years of coverage. But for that same policy, a 65-year-old woman pays around $2,800 annually, which means that she pays $56,000 for twenty years of coverage—a marked increase. Waiting to buy an identical policy at 75 increases the annual cost to about $7,500; this means that the oldest policyholder in this comparison ends up paying $75,000 for only ten years of coverage—a whopping 400% increase from the 55-year-old woman!
Posted in: Elder Care, Long-term Care Insurance (LTCI), Planning for Long Term Care
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[…] Original post by lara and software by Elliott Back […]
I think this is something many people do not want to consider, because it is tied in with their identity. Do you want to think about getting older? In some ways I think a lot of what you read is a scare tactic. But it is a decision you have to make before you get all the information. Do you bank on getting sick and old or staying healthy? Do you count on things getting worse or staying the same?
Yes, but statistics are against you. The chips stacked up on the side of aging, but not dying, just getting sicker. For example, you get a Pacemaker and your ticker will last another twenty years, but that doesn’t mean that the rest of your body will stay in tip-top shape. Statistically you will get old. And you will get sick, but not sick enough to die. At least not easily.
comes down to how you foresee risk. potential/probable versus actual/possible: at a certain point you are gambling, but without the true knowledge of how much your chips are worth.
[…] LTCI is geared toward the senior market. There are three basic types of policies—each of which is based on where benefits will be paid: either in a facility, at home or both. This type of insurance stems from the idea that as you age you may need assistance with anything from the activities of daily living (e.g., dressing or bathing) to skilled nursing care—and that in-home caregivers and care facilities are not affordable for many of us. Furthermore, many worry about draining their personal financial resources, resulting in an inability to leave an inheritance for their loved ones, or even support themselves at all. For more information on when to buy LTCI, check out Is Long-term Care Insurance Worth It? […]
Thank you Lara for pointing out the facts about LTCi being less expensive when you purchase it earlier in life. As you correctly stated, the main reason for this is that you lock in a much lower premium rate, and also because in general you can get a very good rate classification that will also last for the life of the policy.
Another point that needs to be made however is that LTCi is not just for seniors. That is a common misconception and as a result most people continue to procrastinate investing in it simply because they resist the idea of getting older and needing such help.
Although there is no question that seniors make up the bulk of those requiring LTC, the facts are that 40% of those currently in need of long term care are under the age of 65. For instance, one third of the 700,000 folks who suffer a stroke each year are under 65. Traumatic brain injuries are experienced by almost two million people each year according to the federal government, and that cuts across all age boundaries. Also, consider the number of younger people injured in sports and automobile accidents yearly.
Two very popular examples of individuals who had unexpected need of long term care is Michael J. Fox and Christopher Reeve.
I realize that this blog focuses on senior care and I don’t want to belabor this point, but LTCi should not be considered solely as an option for elder care. Actually people of all ages need to seriously consider this kind of protection since it can and does affect people of all age groups. And as you pointed out, affordability is much easier when you invest in this product earlier in life.
Duane Lipham, CLTC
Well stated, Duane. As the saying goes, “life is what happens while we’re making other plans”.
Re Michael J. Fox, though Parkinsons disease can become extremely debilitating, do we know for a fact that he requires long-term care services now?
It is very important to READ (not just listen to what the selling agent tells you)the policy and check out the limits of benefits you might receive. I have seen policies which have a maximum lifetime benefit of well under $10,000. Many believe that if they have to go into a nursing home or require long term home care that their policy will fully pay the cost. For the rest of their life. Not so.
Another point to investigate is who you can hire to provide you with home help. Sometimes relatives are excluded from reimbursement as are individuals who are paid in cash.
Sally, you make a good point about not assuming that a policy design that is assembled by an insurance agent on your behalf is adequate. It’s always a good idea for folks to educate themselves about the costs of care in their own general area and then try to match the benefits to those costs, keeping in mind affordability at the same time.
As you mentioned there are also subtle differences from one company to the next regarding how benefits can be paid out. If a person really wants absolute control over the way they spend their care benefits there are some policies that will pay out benefits in cash with no need for proof of services rendered. This allows the policyholder to pay virtually anyone they want for care received without any restrictions. The only drawback is these policies are often fairly expensive when compared to reimbursement policies, but they do allow the most freedom and flexibility.
Ultimately the decision should be a financial decision based on your estimate of your future health(risk), your current and future income and assets with a determination of what quality of care you are willing to accept in the event of need. If your parents needed care in their later years you may well need care also.
If you do not have the income to pay for the premiums after you retire you have wasted the payments made before retirement if you let the policy lapse.
If you do not have the assets to pay for care after retirement you may be spending funds better spent on other uses.
Without consideration of personal and family health history most of us have at least a 50% chance of needing long-term care. You may have a greater or lesser risk of need.
Purchasing a policy from a company that is likely to contest your need for payment or will be unable to fund the payments in the future is also a waste of money. I know of at least one company that refused to pay coverage because the owner was mentally incapacitated and could not request payment. The family had to seek a guardianship through court wasting money needed for other purposes. The quality and reputation of the company from which you consider purchasing coverage is critical. No, it was not one of the big three. There are too many good companies to waste money buying coverage from an unstable company.
Consider your future income and assets you may be better off purchasing enough insurance to cover one-half or some other fraction of future monthly cost to be supplemented with income beyond monthly needs or savings.
I also know of many children who have purchased coverage for their parents. This is a win-win for the whole family.
You should also look for a rider that increases the amount of coverage based on inflation or cost of living. The cost of care is only going to increase.
Be flexible and consider the risk of not having coverage and of having more than you can afford. There is not one simple answer that fits everyone. Long Term Care Insurance can be a God-send in the event of need. Proper planning helps both you and your family.