BLOG: The Proper Age to Look at Long Term Care Insurance
There are often misconceptions about the best time for someone to learn about, and consider procuring, Long Term Care insurance. Even experts have disagreed about the perfect age to apply. Two of the biggest names in financial self-help, Dave Ramsey and Suze Orman, have wildly different suggestions about when to consider long term care planning. Dave Ramsey says get it before 60, Suze Orman says you should start looking in your late 40s to 50s. So what’s the right answer? Is it ever too early? When is it too late? To answer these questions, it’s important to consider the factors that create a premium.
First, premiums are based on age: the older we are, the more expensive it is to buy a policy. Ages aren’t bracketed into groups, meaning premiums don’t just increase at milestone ages (50, 55, 60, etc.). Each birthday we have makes the premium more expensive, whether it’s going from 46 to 47, or a milestone birthday like 49 to 50.
Second, premiums are based on gender. Research has shown that women now outlive men. Furthermore, when women need care, they also need it for longer on average. This has resulted in gender-based pricing within the long-term care industry, making premiums for women more expensive.
Third, premiums are based on coverage. The higher the monthly benefit, inflation protection, and pool of money, for example, the higher the premium.
Finally, premiums are based on health. The wild card. However knowledgeable and effective financial advisers and debt-reducers are, they are not Long Term Care Specialists, and it’s here that they make a considerable error in their recommendations. I am a Long Term Care Specialist, and I would estimate that 40% of the people I talk with don’t health qualify. Some of you may be tempted to gloss through this part—thinking, oh, that’s not me, I’m in good health. But I speak with over one hundred people every month who have expressed a specific interest in learning about long-term care, and 40% of them are surprised to learn that they are ineligible for the coverage. They range in age from 30s to 70s. This is a staggering figure if you consider that many of them may have known about long-term care for years, just waiting for that magical time to buy a policy when they’re not too young and not too old. This idea that we can wait until the perfect age to buy a policy is deeply ingrained in our perception of long-term care insurance, and it’s a mistake. The long-term care industry has seen consistently higher-than-expected claims, so it’s no surprise that underwriting has become more and more strict. And though we may pay for longer if we start at a younger age, we’re not actually paying more.
When we plan for retirement, we strive to create as airtight of a plan as possible—we want to be reasonably assured we’ll have a certain amount of income, clear-cut expenses, and a manageable budget. We think we’re in control of what our financial future will look like. But all too often, we leave the potential cost of extended care unaddressed. Or worse, we address it when it’s too late. So when considering long-term care insurance, it’s never too soon, and it’s only too late if you can’t health qualify.