According to the American Association for Long-Term Care Insurance, one in three callers to their office expresses great frustration when looking to buy long-term care insurance protection. Many inform the association that they have met with an agent and applied, but they were turned down by the insurance company. Why did this happen and how can those persons in their 40s and 50s begin the process of applying for long-term care insurance?
For most people, applying for long-term care insurance in your mid-50s is considered to be the best age range. People seeking long-term care insurance must “health qualify.” This means just what it implies — not everyone will be able to get long-term care insurance. There is a saying — your money pays for long-term care insurance, but your health buys it. Your health is the single most important factor in eligibility.
While changes to health insurance laws have prohibited companies from denying individuals health insurance based on your health status, this provision doesn’t apply to long-term care insurance.
Consider the following when looking for long-term care insurance:
• Good health lends itself to lower premiums and provider acceptance.
• Provider requirements for health and age vary widely.
• The percentage of applicants who are declined for health reasons increases as one ages.
• Premiums for long-term care insurance are based on your age when you apply.
• There are two main types of policies available: “Comprehensive” or “facility care only.”
• Maximum lifetime benefit.
I am almost 50 years old. Many of my friends are not too far behind me, and quite a few are younger than 60. Why do I mention this? Because, only two have considered long-term care insurance and only one has purchased it (it’s not me). If you haven’t planned for senior living care, then you are not alone. Few people do.
With people now living longer lives, the odds are many of us will need some kind of long-term care. However, many of us are not prepared for it. More than likely, most of us haven’t even thought about it. According to the U.S. Census Bureau, the average life expectancy in 1970 was 70.8 years. In 2010, this increased to 78.3, and it is projected in 2020 that the average life expectancy may reach 79.5 years.
It should be no surprise that most people in their 40s, 50s and even 60s have not given much thought to buying long-term care insurance. More than likely, many are too busy thinking about buying a home, saving for their children’s education, considering an IRA or other retirement investment, or just making the monthly bills. It’s difficult to accomplish these more urgent financial planning goals and have money left over to pay for insurance that covers the possible cost of long-term care needs that may be many years away.
Long-term care insurance is not that expensive. Of course, you may disagree. This is my opinion. According to the American Association for Long-Term Care Insurance, the average annual premium for a 50-year-old buying a fairly typical policy — one that would pay a daily $200 benefit for three years with a 3 percent compound inflation option — is now $2,235 annually. Do the math.
Long-term care needs can very quickly exhaust one’s savings in a short amount of time. Choosing to forego buying long-term care insurance leaves few alternatives:
• Maintain a large reserve of financial assets to cover such expenses.
• Use one’s home equity.
• Rely on family and friends.
• Government assistance.
Don’t think that you are impervious to needing assistance in your later years. Be proactive!
If you did not “do the math,” three years equals 1,095 days; 1,095 times $200 a day equals $219,000 of potential funds to pay for care; $2,235 times three years equals $6,705.
Judson Haims is the owner of Visiting Angels Home Care in Eagle County. For more information, go to www.visiting angels.com/comtns or call 970-328-5526.