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Why are we such procrastinators? It’s easy to hold off on buying something we may not think we’ll need until far into the future. But with long-term care insurance, the price of waiting can be devastating. Let’s make a pact to change our ways!

We’ve been told the cost of long-term care insurance rises as we get older, yet many of us fail to obtain it until it becomes more expensive.

Interestingly, the 45-to-54 demographic accounts for just more than 1 in 5 long-term care policies, while those 55 to 64 make up more than half of those buying the coverage, according to a 2010 report from the American Association for Long-Term Care Insurance.

It’s an unfortunate growing trend: long-term care costs increase in retirement to the point where they can reduce retirees’ financial situations to “a level of crisis,” according to a recent Fox Business article. With that scary scenario in mind, let’s examine some ways we can avoid it by purchasing long-term care earlier.

The case for not waiting

The following 2010 example from the American Association for Long Term Care Insurance shows the true value of adding a policy to your investment portfolio at a younger age:

At age 55, you decide you want a standard plan of long-term care 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. So, by age 65, the $172,600 benefit you bought at age 55 will have grown in benefit value to $276,000.

In contrast, at age 65 you would pay $3,275 for $276,000 in coverage because it’s very unlikely you will still qualify for that good health discount.

Waiting until after age 60 also increases your risk because you won’t have the coverage in place before you might need the care. If something such as an accident or illness occurs before you obtain a policy, you’ll have to pay out of pocket for those medical bills.

Use your youth to your advantage

The younger you are when you purchase a policy, the more likely you are to qualify.

Fewer than 1 in 10 of those younger than 50 is turned down for long-term care coverage, compared to nearly 25 percent of those 60 to 69 who are rejected and 45 percent of those ages 70 to 79, according to the American Association of Long-Term Care Insurance.

The requirements for long-term care get much more rigorous as one gets older. Typically, once you reach age 60, insurers start tightening the window on who they will cover.

For qualifying purposes, family history isn’t taken into account; your own health is what really matters. But if you have a chronic condition, such as Parkinson’s disease or Alzheimer’s disease, you will likely be rejected.

The bottom line: It almost never pays to wait. The longer you procrastinate, the harder it is to get coverage. Don’t delay on investing in long-term care coverage. If you act early, you’ll thank yourself down the road when your payments are lower and you have a guaranteed policy when you need it.

Following are some basic facts about long-term care insurance from the American Association for Long-term Care Insurance:

—Insurers offer discounts to applicants who are in good health. These discounts are locked in; you don’t 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.

—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.

—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. 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.


Author Ron L. Brown, CFP®

Ron is a CERTIFIED FINANCIAL PLANNER™ and President of R.L. Brown Wealth Management. He specializes in retirement, estate, and business planning for professionals and entrepreneurs. Ron assists his clients with creating a financial plan to ensure they are able to live their ideal lifestyle during retirement and leave a strong legacy for their family. Ron has been featured in The Wall Street Journal, US News, Yahoo Finance, Investopedia, and numerous other high profile financial publications.

More posts by Ron L. Brown, CFP®
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