Long Term Care insurance is going to be an essential part of your financial/reti
rement planning portfolio, because despite what you may think, the government is not going to take care of it. They're struggling now to do what they are supposed to, and it doesn't look like it's going to get better anytime soon. Not with all the debate on health care reform; Long term care insurance doesn't even begin to enter into that.
Many people think this is something you get in your late 60s or early 70s. You can, but the problem is that rates are significantly higher at that point, and there's always the risk that you may have developed something rendering you uninsurable. Long term care insurance doesn't take care of your acute medical needs, but rather the 'custodial' type needs. This would refer to walking, bathing, transferring, feeding; your every day basic 'activities of daily living (ADLs). And it isn't just older people who need help with this, but where do you draw the line? You can have someone in their 20s or 30s have an accident or chronic illness causing them to need ongoing assistance.
The time to really start looking is in your late 40s or in your 50s. Reasons why:
1. Rates will be lower; for with each birthday, the rates will go up.
2. When you have no health conditions, you may qualify for a 10% 'preferred health' discount with most carriers. That can add up to worthwhile savings.
3. If you are married and you both apply there is usually about a 25% spousal discount. So you buy two policies for about 25% less each! Unfortunately, as we know, once you hit the 'older years' you risk one spouse possibly passing away and you lose that possible discount. Or, one of you may not qualify for coverage, so you lose the spousal discount possibility.
Case in point--I recently had two requests for quotes. My initial proposal was for a $170/day benefit, 5% compound interest inflation protection, a 3 year benefit period, and a 90 day elimination period. One lady was 52, the other was 72. Standard rate, without any discounts, not taking into consideration the possibility of a preferred health discount. The 52 year old woman's rates per year were $2329/year. The 72 year old woman's rates were $7800/year! And those were the least expensive rates from the three companies I queried.
So even though $2300+ a year is not cheap, long term care costs in California at this time can be as much as $80,000 per year, or more. Compare $2300 vs. $80,000. All of a sudden, it seems more manageable doesn't it? Current statistical information has consistently shown over the years that 65% of the population will require some kind of long term care as they age. And since women tend to outlive men, women are more likely to need long term care services, hence have a greater need for coverage to help defray the costs.
Also, while carriers won't guarantee it, the majority of the time carriers will not raise rates on existing policies. So locking in that $2300/year could be helpful in a few years as you are looking to retire and your income is going down.
So at least do some checking; you can't make a good decision without good information. If you have an agent you trust, get a quote or if they don't sell long term care insurance, ask for a referral to an agent that does. And if you're in California, I'd be glad to help you.
For more info: www.CKingInsurance.com , California Partnership for Long Term Care
Comments
Important issue. Long term care insurance, however, seems like another "expense" in late 40s and 50s. But I do agree from this and what I've heard in the past that coverage now is a better financial decision. I think of this in regard to my father in his late 70s without long term care insurance. He's quite healthy, though.
That's the problem with insurance Don--if you knew when you would need it, you'd hold off until when you did. But there's an old bad joke in the industry; what's the one thing you can't get when you need it the most? Insurance.
My dad was in great health until he developed cancer. At 61. I suggest that people consider looking at it in their late 40s because of the rates, but for many it is one more expense when they probably have kids to raise and college to pay for. So you hold off a bit. But I'd really like to see people do it before they hit their late 60s and 70s for the reasons I cited in my article.
Have a great week!
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