Monday, March 12, 2012

Long Term Care Insurance: When Should I Buy It?

Palestinian woman from the Gaza Strip is givin...Image via WikipediaI am finally old enough to worry that I may need long term care insurance. I worry if I get sick and need long term care that it will probably bankrupt me. Still with kids in college and a 11 year old to raise maybe it's time to take the plunge.

The facts are if you obtain a policy at age 50 it will be cheaper than if I start one at age 60. Tempting the fates and waiting till 60 seems like a good idea because according to the Long Term Care Industry statistics, 90% of long term care claims do not occur untill the person is over age 70. So if your feeling lucky, maybe you should play the odds and wait.

The only problem with that decision is your health may decline before this time arrives, causing you to pay higher premiums or just being declined any insurance. You have to juggle this decision with the odds of you getting sick before then. The question also is does your family have any history of debilitating diseases that you probably will get. If you are looking at this future, the decision is almost made for you to get long term care insurance.

What if your healthy and your parents are in their 90's and completely healthy, will that effect your decision? 

I checked for some answers on this decision by going to Dave Ramsey has held the position that you should wait till 60 to purchase long term care insurance. He is totally against buying it early only to get a better deal. Dave came up with a good example of how to make the decision:

"The average LTC premium for a healthy 50-year-old man is $1,340 per year. If the policy remains in effect until this person is 95, he will spend $60,300 in LTC premiums. For a healthy 60-year-old, the average premium is $2,170; it will cost him $75,950 to keep the policy until he is 95. So buying LTC at age 50 is $15,650 cheaper than buying it at age 60."

Dave Ramsey suggested to invest the $1,340 each year from age 50 to 60.

"If his investment averages just 5% growth per year, he will have $17,412 when he turns 60—that’s all it takes to beat the “savings” on premiums for buying LTC at age 50. If he keeps that money invested until age 95, and never added anything to it, he’d have nearly $100,000 at 5% growth, and that is the low end of how he can expect his 35-year investment to perform."

It's a big decision and not knowing when to make the move just complicates it. These types of decisions have to be made using the math first but later the true reason is to decide is will the decision make you lose sleep or will you rest better because you know everything is taken care of for you and your family. Always seek professional counsel on important decisions.

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  1. Dave:

    You provide quality thoughts and recommendations.

    Dave Ramsey looks at owning long-term care insurance from the perspective of an investor. Other then the very affluent who have excellent financial advise and resources -- people invest not in the stock market but in fixed invetments which have received returns of less then 1% and will do so for a few more years until the economy continues to grow and the Fed raises the discount rate.

    Long Term Care Insurance is a probability -- "maybe you will neet it, maybe you will not." What is not a probability is that unexpectedly you become Ill or Injured and cannot work for an extended period of time.

    Because of this, the carriers will never offer coverage because acceptance is based on health.

    Many people younger then 60 have or will have health issues which will denvy them coverage or they will be rated and the premiums paid will be higher then the coverage.

    Investing is a risk -- sometimes you do will sometimes you do not. If a person has sufficient cash flow to both invest and own long-term care insurance, I advise them do both.

    There are other considrations -- plans continue to change. Incrementally the plans may not be as generous in the future as they are now. What does this mean -- number of years and other benefits which may not be as favorable.

    Life has choices and risks. The affluent understand this and hedge their investments with estate planning and they own insurance to transfer a portion of the risk to insurance companies.

  2. Ray thanks for the thoughtful reply. It is a problem for people who don't have the means to afford it. We all would want naturally. So most people don't get it and play the odds. Dave Ramsey has the cash to pay bills out of pocket and looks at the use of money as an investment. But most of us are stuck with more bills than money. Thanks.

  3. Medicare insurances should be purchased wisely. Our life is always uncertain,if we are in an urgent need of money for any health related purposes but our health-care insurance policy is yet to mature, then it's really annoying. So,it's always good to invest in a flexible policy whose terms and conditions are crystal clear and will mature within a short period of time. Some health care insurance policies does not provide funds for some specific diseases and there are some hidden facts which are not usually noticed during the time of purchase.

  4. There's no specific age to purchase long term care insurance and it's not really for everyone. If you have high risk factors of life-threatening diseases or you have family history, it's advisable to purchase this type of insurance early. This can protect your assets and as well as your family as you receive long term care services such as skilled nursing care, custodial care, and this also covers your stay in elder care facilities. Just to be safe and to avoid financial woes later on, purchase this coverage as early as possible.


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