Why Age Affects the Cost of LTCi
May 16, 2014
Age is a major factor in how much long-term care insurance will cost because it is highly correlated with health, which is also influenced by age. Both are the main measures of your insurability and insurance companies look at these factors in determining the amount of risk that they will take in providing you with coverage.
If your situation surpasses the amount of risk that the insurance company could assume, your application for a policy may be declined look at here. That’s why experts strongly suggest purchasing this policy early especially for those who want to save on premiums.
According to Jeffrey Condit, Senior Vice President and AARP Relationship Leader for Genworth Financial, the ideal age to buy long term care is approximately the age of 50.
Your 50s: The Ideal Time to Buy
Insurers have their own measure for determining an individual’s insurability but here are reasons why you should buy coverage during your 50s.
- Age and health are main influencers not just of the cost of LTCi, but also a person’s chances of getting qualified for a policy. Once a person reaches his or her 50th year, health experts say that a person’s risk in developing conditions and becoming disabled increases, even if he or she maintains a healthy lifestyle.
- Premiums are lower for 50-year-old individuals compared to those in the higher age groups. The rate for a 50-year-old buyer is 27 percent less than for someone who’s 60 years old, and 62 percent lower for a 70-year-old buyer.
- Insurance companies give discounts for individuals who apply with good health. This price cut is locked-in, meaning the discount will remain even if you develop health conditions down the road.
- You are still about 10 to 15 years away from retirement age so you still have sufficient time to plan. Having LTCi at this point is a good head start in strengthening your financial health for retirement.
It’s Not Smart to Wait
Purchasing LTCi is not something you should procrastinate about because delaying means you’ll pay more, either for a policy or care services should you suddenly experience a long-term care event without coverage.
For a policy that will pay for $150 per day of care for three years with inflation protection, a 55-year-old will only pay for $1,084 annually because of health discounts. That amounts to $172,600 in benefits which will grow to $276,000 once the person reaches 65 years old.
Meanwhile, for a 65-year-old to get the same amount of benefits, he or she would need to pay $3,275 annually. This is because they purchased at a later time and they have slimmer chances of qualifying for a health discounts.
On the other hand, if you stay uninsured, you’ll end up dipping in your nest-egg for your care expenses. At the current prices of long term care services, a $100,000 nest-egg can easily be depleted by a year’s stay in a nursing home.
If you’re still in your 50s, take advantage of your health and age. Purchase LTCi early in order to lock-in low premiums and be insured ahead of time for one if the greatest that you may face in retirement, or even today.