The Best Age to Buy Long-Term-Care Insurance

Blanket Advice = Bad Advice

Emily,

It looks like you just rehashed what CR wrote without really spending any time looking into the issue.

Please note: Blanket Advice is ALWAYS bad advice.

There is no one "best time" to buy Long-Term Care Insurance because we are all unique in our health, age, financial situation, family situation and other areas.

The best time to consider this insurance is when 1) You think it's important and 2) When you are still healthy enough to qualify for it and afford it.

I hope that no one takes your advice and then finds themselves uninsurable later. That would be a tragedy.

Doug Burg of CO @ Sep 19, 2008 13:08:12 PM

Consumer Reports Strikes Again

On the topic of long-term care, Consumer Reports is Public Enemy #1.

Other commenters have addressed the issue of when to purchase long term care insurance, so enough said there. But how about the recommendation that only people with an asset range of $200,000 to $2 million should purchase long term care? That is very misleading.

On the low end there are plenty of people who want to protect every penny of their $50, $100, $150 and $200 thousand hard earned savings, have an addmission ticket to quality care and not be subject to Medicaid/Medi-Cal.

On the high end, for those with assets above $2 million, one cannot assume that those are liquid assets and readily available to pay for care when the unexpected event hits. Most financial/retirment plans are not structured to generate an addidional $6,000 per month (today's ave. CA cost) without invading principal. What does it cost to liquidate those assets in terms of taxes and fees? What if we're in a down market?

For high net worth individuals, long-term care insurance can be a valuable estate planning tool. LTCi allows them to follow through with their gifting or other strategies that move assets out of their estate to reduce their estate tax liability. LTCi gives them the peace of mind knowing they don't have to reduce planned giving and hold assets back just in case they get chronically ill. A policy with benefits of $500,000 gives them the ability to gift or move another $1,000,000 out of their estate.

Hopefully Consumer Reports and others will eventually figure out how this works in "real life" and offer better advice in the future.

Brad Tisdale, MS, CSA of CA @ Sep 11, 2008 12:21:21 PM

Consumer Reports.org "Money Advisor" uses long-term care insurance for target practice, but misses the target once again

The Consumer Reports.org article entitled "Long-term-care coverage: How to decide if this pricey insurance makes sense for you" begins: "No one likes to think about having a physical or mental frailty that would cause them to need help with daily activities, but about 70 percent of people now over age 65 will, at some point, require such assistance.

Some might decide to hire a home health aide, while others might choose to move into an assisted-living facility or nursing home".

The article has some good conversation points, however it also misses the heart of the issue.

Today's long term care is more of a disability issue for the young and the old.

Families discuss it too late or never believe it will happen to them; this Consumer Reports correctly points out.

Stretching out the conversation leads to the idea of disability insurance working to replace lost income; CashLTC insurance (CashLTCi) operates with cash for care to manage consequences.

In the Consumer Report article they reported, after speaking with fee-based planners, "in general, the financial planners we spoke with say that if you have a net worth below $200,000 to $300,000 (not including your home and depending on the cost of care in your region), an LTC policy will not be an affordable option and you will probably rely on government programs should you need long-term care.

If you fall in between, you're a more likely candidate for an LTC policy".

The challenge with this thinking is that, if you are only looking at risk versus consequences, the rule they are using could apply to life insurance.

For instance, a 50-year-old male actuarially has less than a 2% risk he will die before he is 65, so why would he buy life insurance?

He probably would not; his real motive is most likely to create an immediate estate for his loved ones should something happen to him.

The Consumer Reports experts advocated that there is very little reason to buy a plan in your 40s and early 50s as you still have time to ramp up your savings and prepare to pay for care out of your own assets.

Again, it's about managing the consequences when things do happen.

With over 50 million unpaid caregivers, in comparison to 1.8 million in a nursing home and 900,000 in assisted living facilities it is clear that the unpaid family caregiver in today's economy needs a lifeline.

For a CashLTCi policy, with a 90 calendar day elimination period, from a major carrier, the monthly premium for a 70 year-old married individual is $121.03; for a 65 year-old it is $82.08 a month, for a 50 year-old it is $27.95 a month and for a 40 year-old it is $15.26 a month (married standard South Carolina rates).

This will provide $100,000 in cash benefits that pays out $3,000 a month to anyone, for anything, tax-free.

Most families would be better equipped to manage consequences with $100,000 or $200,000 in cash for care coverage.

There are very few families who have looked far enough ahead to set aside a pool of money to cover the cost of a long term care life-event.

CashLTC.org invites the media and financial advisors to explore the value of cash for care.

Gregg Kroman of NC @ Sep 08, 2008 20:04:37 PM

Consumer Report is Still Wrong

I remember a reporter quoting Consumer Reports back in June of 2006. I wrote a post in our PrepSmart blog rebutting the Consumer Report "facts". They were wrong then and are still wrong today.

* There is no "Sweet Spot" for buying LTC insurance. Since Long Term Care insurance can be much less expensive in your 40's, buying a policy then can actually save you money in the long run (if you buy the highest amount of inflation protection) PLUS you will be protected for longer. Waiting is risky.

* Every person has at least a 50-50 chance of needing long term care. Long term care can be needed after accidents or simply from living long lives. Deciding not to buy LTC insurance because your relatives are healthy is like not buy theft insurance because your live in a good neighborhood. It's ridiculous.

Just like a thief, long term care needs can strike anyone at any time. My husband and I know from first hand experience. He was diagnosed with Multiple Sclerosis at age 51 before buying LTC insurance and now I am his only caregiver - day in and day out with no breaks. Now I can't leave him to work so our financial situation has been severely impacted.

Buy as young as you can, insure for as much as you can, get the best inflation protection you can and make sure you can afford to pay your premium for years to come. Use a consumer-focused, experienced Long Term Care insurance broker to get the best policy for your financial and health circumstances.

Best to you,

Kimberly

Long Term Care Author and Caregiver

PrepSmart.com Long Term Care Insurance Buyer's Advocates

Kimberly of AZ @ Sep 04, 2008 15:47:20 PM

LTCI Examples

JLP,

The $100 was just an example and not meant to be the actual benefit that someone might buy. However, most people choose to buy less that an amount that would cover the whole cost. Very few claims are for nursing home care. Most are for home care. Anyway, the $100 was just an example and the exact same math applies no matter what the daily benefit (ie. $200 a day would be exactly double the premium of $100)

You other point is correct in that my example assumes no rate increases. There is no way to predict that. The two biggest insurance companies in the business have each had one increase in their entire history (34 yrs and 20 yrs). The biggest carrier has had one increase of about 12% in 34 yrs. What other insurance product can claim that. With state rate stabilization activity, insurance companies have been put on notice that rates they file need to be at a level that will be sufficient forever.

I also want to point out that the biggest increases have been in the introduction of new plans, not increases for existing policyholders. Just like we cannot project rate increases, we cannot project cost of new plans which will cost more. Based on historical data, it is much more prudent to buy at a younger age and lock in your age and health. A new much more expensive plan coming out would make it even more costly to wait than I illustrated.

Mike

Mike Ashley of KS @ Sep 03, 2008 16:22:52 PM

Mike,

Thanks for the illustration.

A couple of things:

1. You're assuming that the annual premium never increases. Can it really be assumed that the rate won't increase for 35 years? Somehow I just don't see that happening--especially once the Baby Boomers have been through the system.

2. Also, you assumed a daily benefit of $100 when the cost of a non-private room in a nursing home averages $180 per day (according to a 2006 LTC report). Where's the other $80 per day ($30,000 per year) supposed to come from?

JLP of TX @ Sep 03, 2008 14:18:58 PM

Proof of Advantage of Buying LTCI Younger

Not even taking into account the fact that a person might become uninsurable or rated up - and that new more expensive policies will probably have come out, here is the math.

Age 50, Preferred rates buying a $100 per day, 4yr plan, compound 5% inflation protection, married.

Annual Premium - $898 - if paid to age 85 total is $31,400

Daily benefit at age 85 would be $552 per day so it would take 57 days on claim to break even

Age 60 - buying same plan except initial benefit would have to start at $163 per day to match what the 50 yr old's benefit would be up to by age 60 and to have the same $552 per day at age 85.

Annual Premium - $1960 - if paid to age 85 total is $49,000

Buying at 50 vsx 60 saves $17,600 and you are insured for 10 more years during which something could have happened to you.

This same math applies to about any situations.

I hope this explains it .

Thanks, Mike Ashley

Mike Ashley of KS @ Sep 03, 2008 13:18:29 PM

Funny...

How all the commenters who didn't like the article are LTC salespeople. Who would have thought?

For those who say buying LTC in your 40's is the best way to go, I'd like to see the proof behind those assertions.

JLP of TX @ Sep 03, 2008 12:31:27 PM