Many people start thinking about putting a long-term care insurance plan in place when they are IN or near retirement, but this can often be too late!
Health
When applying for long-term care insurance, your health is super important. If you aren’t healthy enough, you will not qualify for it. Insurance companies establish their own health requirements and offer discounts to applicants who are in good health. Once you have coverage, the insurance company cannot take away your coverage if your health gets worse.
Premiums are based on many factors, but your health and age are big factors when you apply. The insurance company actually rewards you for buying a policy at a younger age, which means you get more insurance on each dollar.
Example
This couple wants to buy a traditional LTC insurance policy. They are age 50 and in Preferred health.
They’re considering waiting 5 years to buy a policy and want to know the differences in benefits received with similar premiums paid.
Here’s the breakdown:
| Today | Couple – age 50 | Couple – age 55 | |||
| Monthly benefit- | $4,500/ea. | $3,400/ea. | |||
| Total benefit- | $162,000/ea. | $122,000/ea. | |||
| Benefit period- | 3 years | 3 years | |||
| Inflation- | 3% cmpnd | 3% cmpnd | |||
| Shared care- | Yes | Yes | |||
| Total premium- | $4,273 | $4,268 | |||
| In 30 years | |||||
| Monthly benefit- | $10,922/ea. | $7,000/ea. | |||
| Total benefit- | $393,216/ea. | $250,000/ea. | |||
| Benefit period- | 3 years | 3 years | |||
| Inflation- | 3% cmpnd | 3% cmpnd | |||
| Shared care- | Yes | Yes | |||
| Total premium- | $4,273 | $4,268 | |||
▪ Shared care – allows one spouse the ability to dip into the other spouse’s bucket of money if they spend their bucket of money
If they wait and buy at age 55 instead of age 50, their monthly benefit is $1,100 LESS per person in just the first year. In 30 years, it’s almost $4,000 LESS each month per person! Their initial total benefit amount is $40,000 LESS and in 30 years, it’s a whopping $143,000 LESS!
There is no advantage to waiting to put a plan in place if you’re healthy.
Waiting not only decreases the amount of insurance you can get for the same dollar, but you aren’t guaranteed that you can even health qualify if you wait. One bad diagnosis or accident can disqualify you.
Also, some carriers have even recently changed their pricing on new policies. Policies issued in the future may have higher pricing than policies issued today.
So when should you buy long-term care insurance?
When you are healthy and younger!
I always start with a health pre-screen questionnaire with my clients. This allows me to accurately assess your health status and match you with the carrier you would best fit with before taking any applications.
I like to talk with my clients around age 50 because typically they’re still in fairly good health and we have more options when designing a plan. Although I’ve had clients that don’t qualify even in their late 40s because they’re very unhealthy and have a long list of medications and medical impairments. If you’re in your 60s or 70s, in pretty good health, and you haven’t put a plan in place yet, don’t worry, there may still be options for you too! It will be more expensive since you’re older, but you may still be able to put together a meaningful plan.
The Bottom Line
Health and age are incredibly important when considering long-term care insurance. If you’re in your 40s or 50s, this is a great time to start planning while your health is probably still good. The older and more unhealthy you are, the more expensive your insurance premiums will be.