Long-Term Care Insurance (LTCI) is one of the ways that people can pay for their long-term care needs later in life. Often a LTCI policy is purchased years before the individual needs to make a claim on the policy or use the policy benefits.
Age and Your Ability To Health Qualify For Long-Term Care Insurance
Baby boomers started turning 65 in 2011 - the older population in 2030 is projected to be twice as large as in 2000, growing from 35 million to 71.5 million! Between 2000 and 2040 the number of older adults with disabilities will more than double, increasing from about 10 million to 21 million. In 2009, more that 42% of people age 65 and over reported a functional limitation. Eighteen percent had difficulty with 1-2 Activities of Daily Living, 5% had difficulty with 304 ADLs and 3% had difficulty with five to six ADLs.
Here are some important facts to keep in mind:
- Insurers offer discounts to applicants who are in good health
- These discounts are locked in. You do not lose them if your health changes.
- Each insurer establishes their own health requirements. If you have some conditions or take some medications (even common ones) you should speak with a long-term care insurance professional. You may want to request a quote (see above).
- Existing health conditions may be acceptable (even if you were declined several years ago.
- The percentage of applicants who qualify for good health discounts declines as one ages (see the chart below)
- The percentage of applicants who are declined for health reasons increasesas one ages (see the chart below)
- Premiums for long-term care insurance are based on your age when you apply.
- Costs increase on your birthday. The annual rate increases are generally 2-4 percent in your 50s but start to be 6 to 8 percent per-year in your 60s.
2010 Data: Your Age Impacts Discounts and Declines
Your good health can help reduce the cost of LTCI. Insurers offer discounts that you do not lose even when your health changes. Below is the percentage of applicants who qualify (American Association for Long-Term Care Insurance 2010 Sourcebook)
- Ages 40 to 49: 62.0%
- Ages 50 to 59: 46.0%
- Ages 60 to 69: 38.0%
An existing health condition can cause you to be "rated" (meaning you'll pay more). Or, you may not be able to health qualify at all. People often wait until they think they need something before they start planning for it and unfortunately, in the case of Long-Term Care Insurance, this will not work in your favor. The AALTCI recommends the ideal age to investigate long-term health care insurance to be between the ages of 52-64.
In fact, according to data from the American Association for Long-Term Care Insurance, the rate of rejection for long-term care insurance seems to increase with age. So you may even want to look into options sooner. The increasing rate of rejection as you age makes a lot of sense given that insurance is based on an expected risk, and as you get older more medical restrictions and situations may come up which would point to an increased risk leading to a greater need for long-term care.
Below is the percentage of applicants who were declined - they did not qualify for the insurance they applied for (American Association for Long-Term Care Insurance 2010 Sourcebook)
- Ages 50 to 59: 14.0%
- Ages 60 to 69: 23.0%
A Real Cost Example: Why Waiting Doesn't Pay
Because of health changes that take place most often after people reach their 50s, long-term care planning starting in your 50s is best. But there is another reason it doesn't pay to wait -- you'll pay more. Here is a real example. (Note: Although the following scenarios use 2010 rates the premise is the same).
- You are age 55. You want a "standard" plan of coverage. That equals $172,600 in current benefits (based on a $150 daily benefit for a 3-year plan). Your cost is $1,084 per year because you qualify for the preferred health discount (spousal discount too).
- Long-term care insurance protection should grow to keep pace with rising costs. The one we are illustrating does. So, by age 65, the $172,600 benefit you bought at age 55 -- will have grown in benefit value to $276,000.
- Someone age 65 would pay $3,275 for $276,000 in coverage because it's very unlikely they will still qualify for that good health discount.
- This reflects 2010 rates. Rates will rise. The 55 year old who waits until 65 will pay even more. It almost never pays to wait. And, there is one more important point. While you are waiting, you are uninsured. If something happens causing you to need long-term care (such as an accident or an illness), you'll have to pay yourself. While most people need long-term care in their 70s and 80s, some do need care in their 50s and 60s.
The overall cost of new long-term-care coverage jumped roughly 9% between 2014 and 2015 according to the American Association for Long-Term Care Insurance, a trade group. A married couple both age 60 could expect to pay $2,170 per year for $328,000 worth of coverage, up from $1,980.
When it is time to make a claim, some find it challenging to understand and interpret their LTCI policies. Policies are filled with complex terminology and confusing terms and conditions. To help individuals navigate their LTCI policies better, Home Instead, Inc. has developed an educational guide. This Free Guide from Home Instead Senior Care® aims to provide information to help you:
- Learn an overview of LTCI
- Gain a better understanding of policy benefits
- Determine care needs
- Discover tips to initiate a claim
- Find resources for family caregivers
- Consider ways caregivers can start planning for their own long-term care needs
Download your free copy of the guide “Navigating Long-Term Care Insurance” and contact your local Home Instead Senior Care® franchise office if you would like to start using your LTCI home care benefit.
Home Instead Senior Care – Cape Cod has been providing services on Cape Cod since 1998
Call toll-free 877.257.3124 or go to https://www.homeinstead.com/214
from https://www.aaltci.org/long-term-care-insurance/learning-center/best-age-to-buy-long-term-care-insurance.php; https://homeinstead.com and https://www.kiplinger.com/article/retirement/T036-C000-S004-4-secrets-to-buying-long-term-care-insurance.html
10 Tips for Buying Good Long-Term Care Insurance: Your LTC Buyers Checklist
Since each insurance company works with their own underwriting standards, it is helpful to have a checklist of items to ask about, so you understand what you are shopping for and buying in the coverage.
Here are some points that are important to consider when you are looking for the best company to cover you for LTC:
- Ask them about the Activities of Daily Living requirements for you to receive a payout of benefits, you want to understand what qualifies for coverage under the LTC plan you are considering.
- Does it cover cognitive impairment, some people may have cognitive impairment, yet still be able to perform ADL. Will the plan you are looking at payout in these cases?
- Find out what is on the list of Activities of Daily Living that qualify for each plan you are comparing. For example, maybe there is a function of daily living that you cannot perform, but by the terms of the policy you chose, it isn't considered one of the qualifying ADL. A company will usually require more than one activity of daily living to be an issue before you can qualify for your benefits. You want to know what qualifies in advance before you buy your policy. There is no standard definition across the industry for how ADL are evaluated, so it is important to ask questions and get examples of situations for the coverage you are buying. Some examples of ADL are: bathing, dressing, moving around (transferring), eating. How each is defined can make a difference.
- Ask them if there is a cash value or option to cash out should you not use the coverage and if the policy pays dividends. What happens if you die and haven't used the coverage?
- Compare the cost of single coverage vs. shared coverage with a spouse. This is a good way to save money. In these circumstances ask for a full explanation of what happens and how this shared benefit works if you both are requiring care, vs. only one of you.
- Do premiums increase over time or remain constant? Is there inflation protection? Inflation will affect rates of long-term care you may have options in the plan you purchase that addresses this.
- How will payment work on a claim? What is the claims process? Are there monthly or daily amounts? What are the limits?
- What is the maximum benefit pool? What is the maximum amount of time the benefits are payable for? On average, an LTC policy may provide between one to five years of coverage. Policies do not usually have an unlimited amount of time. This is an important factor to consider when comparing policies. Then, you will want to know if there are riders available to extend that time. These details can make a big difference in your choices and when comparing cost.
- Is there a waiting period? How long is it?
- If you take a policy with a longer term waiting period, do you have other benefits that you qualify for that can cover you during the waiting period, like Medicare or other private health plans?
Last, But Not By Any Means, Least, Some Statistics
- If an individual set aside and invested the value of the average LTC insurance premium for 22 years, she would accumulate only enough to pay for six months of care. By putting the same amount into premiums, she could own a policy covering more than three years of care.1
- Compared to those without LTC insurance, insureds reduce their out-of-pocket LTC costs by between $3,000 and $5,000 a month (depending on the service setting).1
- Individuals with LTC insurance receive on average 35% more hours of care than those without, and their care is also somewhat more likely to address their needs than care received by the uninsured.1
- 4 million Americans are living with Alzheimer’s disease.2
- The financial impact from a long term care event is massive: Approximately one-third of caregivers provide 30 hours – or more – of care per week. Half of those who do so estimate that they lost around one-third of their income. If a long term care event lasts an average of three years, that’s potentially a full year’s worth of income lost in the course of a single long term care event.3
- American women live longer than men (81 years on average versus 76 for men), according to data released in 2013 by the Institute for Health Metrics and Evaluation.2 This longevity translates to potentially more unhealthy years on average for women — 11 years compared to 9.7 for men.
- 70% of people over age 65 will require some care at some point in their lives.4
- $709,647 is the projected average cost for 3 years of long-term care 30 years from now.5
- Two-thirds of Americans age 40 and up say they’ve done little or no planning for their long-term care needs, according to a poll conducted in 2017 by the Associated Press-NORC Center for Public Affairs Research, with funding from the SCAN Foundation.
- A woman turning age 65 today can expect to live, on average, until age 86.6. About one out of every four 65 year olds will live past age 90, and one out of 10 will live past age 95.6
- 59% of caregivers and 49% of care recipients who had long term care insurance reported feeling significantly less stress than non-owners.3
- $97,455 is the average annual cost for a private room at a nursing home according to the 2017 Cost of Care study by Genworth Financial.
- The top four reasons individuals purchase of long term care insurance:7
- To protect assets
- For financial security/peace of mind
- To cover the cost of LTC services in the future
- They don’t want to be a financial burden on family
- Every 66 seconds someone in the United States develops Alzheimer’s disease.8
- More than 5 million Americas are living with Alzheimer’s disease. By the year 2050, this number could rise as high as 16 million.8
- In a survey of more than 3,000 non-professional family caregivers nationwide, 75% don’t receive any form of financial assistance or payment for their work. Meanwhile, 43% cite “just getting by” as a current financial priority.9
1America’s Health Insurance Plans. “The Benefits of Long-Term Care Insurance and What They Mean for Long-Term Care Financing”. November 2014.
3 The Expanding Circle of Care: Beyond Dollars 2015. Genworth Financial. 01/20/16.
4 U.S. Department of Health and Human Services, National Clearinghouse for Long-Term Care Information, www.longtermcare.gov, September 2008
5 Based on Genworth Financial’s Cost of Care Survey, conducted by CareScout, June 2017 and an assumed rate of inflation of 3%
6 Social Security Life Expentency Calculator. https://www.ssa.gov/planners/lifeexpectancy.html
7 Mutual of Omaha’s 2013 Consumer Study: Understanding Long-Term Care Buyers
8 Alzheimer’s Association 2017 Facts and Stats Infographic.
9 Skyrocketing Costs of Dementia: What it Means for Clients. A comprehensive study by the nonprofit Transamerica Institute. 2017.
Compiled by Susan Fernald, Home Instead Senior Care – Cape Cod