“Long term care is for the elderly and infirm.”
“There’s no need for me to think about long term care until I retire.”
“I’m still young and leading an active life. I don’t need to worry about long term care for another 20 years.”
These are common assumptions we have as we move into our 50s. After all, 50 is the new 40, right?
Unfortunately, life does not always play by our rules. According to the American Association for Long-Term Care Insurance, 37% of Americans who need long term care are younger than 65. In addition, the ability to qualify for long term care insurance – and the resulting cost – all work in your favor if you start the process well before 60.
Qualifying for Long Term Care Insurance
There’s an old saying regarding long term care insurance: “Your money pays for it, but your health really buys it.” You can’t just purchase long term care insurance like you would bananas from the grocery store: Like many other insurance products, you have to qualify for coverage, and there are numerous preexisting health conditions, such as certain chronic diseases, major surgeries and conditions requiring medication, that could make you ineligible.
For that reason, it’s helpful to apply for long term care insurance when you’re relatively young and healthy. According to a recent AAALTCI survey, only 13.9% of applicants in their 50s were denied coverage. Once applicants reached their 60s, the percentage of denials jumped to 22.9%, and nearly half of all applicants in their 70s were denied coverage. While most of these denials are due to a general decline in health that accompanies getting older, there’s also the increased risk of a catastrophic event, such as a stroke, heart attack, cancer or accident, that could permanently disqualify you for coverage.
But What About Cost?
The most common concern for those considering long term care coverage at a younger age is cost – specifically, having to pay premiums for a longer period of time. Fortunately, this is less of a concern now than in the past. Years ago, the primary type of LTC insurance available was pay-as-you-go, “use it or lose it” coverage. However, most long term care policies purchased today are hybrid, “either / or” policies that pay for either long term care or a death benefit to your beneficiaries. (See this article for a more complete explanation of the different types of long term care insurance.)
Policies that return most or all of the premiums to your beneficiaries is worth considering as part of a broader estate planning strategy. The total premiums required for a 50-year-old could be 17% less than those for a 60-year-old and 40% less than for a 70-year-old. Plus, many insurers allow you to choose how to pay the premiums, be it in one lump sum or spread out over several years. Typically, the younger you start paying the premiums, the lower the payments and the longer you can spread them out , allowing you to better budget the cash flow.
There are some things you should be aware of when applying for long term care insurance, regardless of your age:
- Make sure you carefully review the pre-submission guide from the insurance company. Most companies will provide a list of conditions, diagnoses and prescriptions that would prevent you from being approved. Some conditions only require an additional waiting period for consideration.
- It is better to not apply than to apply and be declined. Most applications ask if you have ever been declined for insurance. If you decide to apply with a different company in the future, you will have to explain the circumstances that caused you to be declined.
- When deciding how much long term care coverage to purchase, remember that women statistically require more long term care then men. Women often are the caregivers in their family plus they tend to live longer. This results in more time alone needing care. You might want to consider additional years of coverage for the adult women in your family.
- Remember that you might not need to cover all potential long term care expenses – most people in retirement typically have other income sources, such as Social Security and pensions, that will continue even while you receive care.
- When exploring long term care benefits, be sure to review any benefits that will cover the additional costs of home healthcare (allowing you to remain in your home), and make sure your children and other family members know the details of your policies and exactly what is covered. By taking full advantage of these benefits as soon as possible, you can help avoid the additional strain of caregiving on family members. If you do need a family member to help with care, many policies will pay for a relative to give care for several months. Many policies also have a “concierge service” that will help you find, interview and coordinate professional care when that time comes.
Even though it may be a topic we may not want to think about, sooner rather than later is wise when it comes to planning for long-term care needs. Take charge of the process by working with a financial professional who incorporates it into a holistic financial plan. The experience of a Baird Retirement Management Financial Advisor can help you navigate this process.