Who Should Buy Long Term Care Insurance
If you are over 50 and expect to retire with more than $70,000 in assets, you probably should. Given the potentially devastating costs of Long Term Care within a year after admission as private-pay residents, more than 90% of nursing home residents are impoverished and the high chances of needing care, Long Term Care insurance is a key part of sound retirement planning. We feel very, very strongly about this. However, we would never say that Long Term Care insurance is right for everyone and this page should help you better understand who should buy long term care insurance.
Expenses Without Insurance
Currently, a nursing home will cost you, on average, $70,800 per year. By 2030, these nursing homes are expected to cost $190,600 per year. Assuming a stay of 2.6 years, the average nursing home bill in 2030 will be US $495,560. And by 2060 it will skyrocket to more than $250,000 per year.
Risks Without Insurance
At the same time, your risk of needing Long Term Care is high. The probability of becoming disabled in at least two activities of daily living or of being cognitively impaired (common triggers for receiving benefits from LTC insurance) is 68% for people age 65 and older. While Americans are living longer, they're not necessarily living healthier. The prevalence of cognitive impairment among the elderly has increased dramatically over the past decade, while the prevalence of physical impairment remains unchanged. Currently, 22% of people over age 85 are in a nursing home and about half of those over age 85 who are not in a care facility require some assistance. We hope you and your loved ones never need Long Term Care. But early planning can help offset the potentially devastating effects of LTC, if you don't beat the odds.
The average buyer of individual Long Term Care insurance in America is approximately 58 years of age depending on the study you read. This has dramatically decreased from the high 70s only a decade ago. In the worksite (employer sponsored plans), the average age LTCi buyer is only 41. The Federal Government has also offered LTCi coverage to all federal employees, spouses and dependants - 20 million Americans! However, they have not subsidized the cost. This makes a significant statement to the baby boomers of this country. Go out and buy LTC insurance!
Every year that a person waits to buy Long Term Care insurance could cost them 10% to 12% in premiums. Therefore, the younger you are, the better off you are. In addition, typically, the younger buyer has less health concerns to deal with when it comes to getting underwritten and approved by an insurance company.
Long Term Care Insurance Underwriting
Long Term Care insurance underwriting is not as tough as you may think it is. Over 75% of all applicants are being approved for coverage. It is much harder to qualify for a disability, health or life insurance policy medically. Many people who apply for LTCi are taking multiple medications, could possibly have had a history of cancer, heart problems or even diabetes. The key is control. Companies want to see that you are stable and that you don't have conditions that will cause you to become disabled. You will even be eligible for preferred health discounts if you are squeaky clean.
You may also be eligible for a discount if you are married or a member of a particular association. Some companies will give you a married (or partner) discount even if only one of you is applying. You can also read this article on ways to save money on Long Term Care insurance.
However, Long Term Care insurance is not right for everybody. Whether or not you should purchase a policy depends on your health, income and assets. If you are retired, with less than $70,000 in assets (not including your home and car) or your only income is your Social Security or SSI benefits, you probably shouldn't be purchasing Long Term Care insurance. There are no hard and fast rules however. $70,000 in Omaha is not the same as $70,000 in Manhattan and everyone's family and health situation is different. Nevertheless, the premiums should be affordable, even if they increased by 25%, without significantly changing your lifestyle. Nobody should have to eat tuna fish every night in order to pay for Long Term Care insurance premiums!
On the other hand, for those with assets to protect, insurance is usually the most cost effective way of protecting those assets from the potentially devastating costs of a Long Term Care event.