AT WHAT AGE SHOULD I PURCHASE LONG TERM HEALTH INSURANCE?

IN ORDER TO answer this question we should take a look at reasons for buying long-term care insurance at different ages.

Ages 50 to 60

It is best to begin investigating long term care insurance in your early 50’s since the premiums are driven by age and current health.  Additionally, there is something about age 50 that catapults our thinking from the life we have had to the life that lies before us.  (Maybe it is because we get our first mailing from AARP!)  Retirement seems to take on a greater meaning, and articles about retirement suddenly catch our attention.

If you plan to retire at age 65, you have 15 years to be prepared for those all important years when you are living on the planning that you have previously done.  At age 50, you still time to make a difference in what that picture will look like.  If you are like most people, you are amazed that you have already lived a half a century and you can’t fathom how the time has passed quickly.  You may still be helping your kids become adults or financing their journey.  You may also begin to realize that your parents are getting older.   If you haven’t purchased long term care insurance by this time, start doing your homework.  The premiums will never be lower and, if you are in good health, you will qualify for the coverage and possibly get a discount because of your health history.

Another reason to consider buying long-term care at age 50 is the availability of an accelerated payment option.  This is an excellent method of payment if it fits into your budget.  For example, If you are 50, you add a rider to your policy that would allow you to own a ‘paid up’ plan in 10 years by age 60.  You will be paying all of your long-term care insurance premiums during your earning years in order to own a ‘paid up’ plan during your retirement years. Premiums for this type of plan are considerably higher, but owning a ‘paid up’ plan at retirement makes this option almost too attractive to pass up. (Although your policy could get a rate increase while you are paying the accelerated premiums, once a plan is paid up, the possibility of a rate increase is eliminated.) Peace of mind that comes with owning a ‘paid up’ plan is immeasurable.

For those of you who have disability insurance through the workplace, please remember that the disability that you own typically expires at age 65 or 67. As you get closer to the time the disability coverage expires, your potential benefit due to a claim will be less because the benefit will be paying out for fewer years. For example, if you are 50 years old and become disabled, your policy will pay benefits for 15 to 17 years, depending on the terms of the contract.  If, on the other hand, you become disabled when you are 60 years old, your benefits will be payable for 5 to 7 years. A long-term care insurance policy with inflation protection will have increasing benefits.  Every year you own the policy, the benefits payable during a claim increase.

Premiums for an individual disability policy can be substantial, and thetotal amountpayable to you decreases every year should you become disabled.  Evaluate your policy to determine what the policy’s value is to your current financial plan.

To illustrate my point, I will share an experience.  I was recently working with a 55-year-old, successful business owner who had an individual disability policy with a monthly premium of approximately $250.  His business had developed a plan, that if he should become disabled, the income from the business would continue to support his family making his disability policy less valuable to him.  I suggested that he take the premiums he was paying for his disability policy and buy a long term care insurance policy for himself and his wife.  Both of them were young and healthy, they were able to purchase an excellent comprehensive plan that included inflation protection with the same premium dollars.

In most cases, it is important to keep your disability coverage during earning years.

Whenever possible, I like to stack a long term care policy on top of current disability coverage.  This gives the family extra protection in the event of a catastrophic injury or illness.  The disability benefit typically replaces 60% of one’s earnings. If the employer provides the benefit, it will be taxable and thus create a considerable shortfall for the family. Long-term care insurance can help to make up that difference and pay for the health care services that may be needed down the road.  When the disability expires, the long term care will continue to pay out benefits for as long as the contract stipulates.

Before buying long term care insurance in place of disability insurance, one must understand what triggers the benefit in each policy.  Disability insurance is triggered if you become unable to do ‘the material and substantial duties of his/her occupation’.  Long term care insurance is triggered if you are unable to perform certain ‘activities of daily living’ or have a cognitive impairment such as Alzheimer’s or dementia.  It is entirely possible that one would qualify for disability benefits and not qualify for long term care insurance.

So, if you don’t already own long-term care insurance, now is the time to evaluate this insurance plan as it relates to your particular retirement needs.  Premiums increase significantly as you get older, and health issues may prevent you from qualifying for a long-term care plan.

Ages 18 to 30

Why buy long term care insurance at age 18?   Most 18-year-olds e still being financed in varying degrees by their parents, and a disability at such a young age would be devastating and could last a lifetime.  Health insurance pays the doctor and the hospital in the event of an accident or illness, but once the disability or illness becomes custodial in nature, health insurance no longer pays benefits.  It is important to understand that a long- term care event could happen at any age and health insurance may not be enough.  The premium for a long-term care policy is very affordable at this age and can add a layer of protection that brings enormous peace of mind.

Age 30 to 50

If you are in a profession that provides disability insurance for you or you own an individual disability policy consider owning long term care insurance as an add-on to your disability coverage.  Physicians and other high end professions, for example, are limited in the amount of disability coverage they can own which leaves a sizeable gap between their disability benefit and their earnings. If you don’t have other resources to fill the gap, it would be wise for you to purchase a long-term care policy.

A long term care policy is another option if you down own disability insurance either because it isn’t available to you or because it is too expensive.  A policy will provide some financial protection against a life-changing catastrophic event. If you don’t own disability insurance because it is not available to you or it is too expensive, investigate a long term care policy which will provide some financial protection against a life-changing, catastrophic event.  Remember, having a long-term health care need is a huge issue without having a financial and emotional crisis to deal with as well.

Recently, I was working with a computer technician in his mid-40’s.  He was concerned about the financial wellbeing of his family if he became disabled. When we looked at a disability policy, we found that the premiums were very high and the benefits offered for the premiums were insufficient.  Since the client felt he could perform most of his professional duties from home, we decided to look at a long-term care insurance policy instead.  As a result he will receive twice the benefits he would have received from a disability contract for half the premium He is comfortable with the concept of long-term care insurance providing a safety net to meet a loss of income due to an accident or illness.

Age 60 to 70

Fortunately, a well designed long-term care plan is still considered a bargain compared to the cost of services due to a long term health care need.   Look at all the options of a plan design.  If you are still working but plan to retire at 65, you will continue to pay the premiums after you retire. Make sure you buy a plan that fits your post retirement budget,, because buying a policy and then letting it go is a senseless waste of money.  Consider using a simple inflation rider rather than a compound inflation rider so your premium fits your budget.

Ages 70 to 80

Even at this age, it may still wise to consider buying long term care insurance, especially if you are 75 or younger.  Early in the evolution of long term care when the product first came on the market, many of the people that were inquiring about it were over age 70.  Most purchased the coverage as protection for their families and their assets. Now, more than 5 million Americans are living with Alzheimer’s disease (nearly one in two people over 85), and it is forecasted that 16 million people will be living with Alzheimer’s disease by 2050. Long-term care coverage is especially important for families who care for someone with Alzheimer’s disease.

Age 80 and above

Although some companies will offer long term care insurance up to age 84, in most cases, this age group should investigate the alternatives to individual long-term care insurance. An annuities and life insurance with a long-term care rider would be a good choice.  See the information on LINKED BENEFITS for additional information