The Right Mindset For Long Term Care Insurance

Food For Thought: It is quite a possibility, that most of the readers of this article have a life insurance policy but may have missed on taking care of later life health expenses and hence might not be having long term care insurance. In the previous two links you can check on both these concepts. We all know the importance of a life insurance policy in our lives. It helps to provide a financial cover to our loved ones if we die. It helps them to pay off the mortgage as well. On the other hand, we cannot neglect the need of long term car insurance in our lives, considering the fact that life expectancy is rising and average Americans life span is 78.7 years (2012).

As people enter their late 50’s, the two most important financial responsibilities are taken care off. Most of them have seen their children become independent and mortgage debt paid off in full. The mindset drifts from worrying about your family’s financial security towards your own well being in old age. Who will take care of you when you really need someone due to ill health?

Buying a standalone long term care insurance product has become expensive over the years. To check how much does long term care insurance costs in your state you can check click here. Generally, long term care insurance is a product associated with senior citizens. However, it is for anyone of any age who is unable to perform day to day activities independently. Like dressing, clothing, bathing etc.


Do You Need Long Term Care Insurance

Let me ask you a simple question. Do you wish to die early? I am sure each and every person will say NO. In other words, people want to live longer and your odds of needing long term care insurance become all the more important. There is no favorable answer to this thought. It totally depends on your personal need. There might be a possibility that you may never need long term care and you might come across a health situation in life wherein it becomes a necessity. If it does, is very expensive. In such situations long term care insurance becomes vital.  Medicare doesn’t pay for long term care and health plans don’t cover it. So, in a sense you do need it.

A lot depends on how soon you have planned for your long term care. Ideally, LTCI should be an integral part of your retirement planning. Hence to gain maximum benefit along with reasonable cost of premium, the right age is in 40’s and 50’s. Many individuals are reluctant to purchase standalone long term care insurance (LTCI) because for them buying for a reason which may never happen is an obscure thought. Another factor which stops people from buying LTCI is the increase in premium which can happen during the course of the policy. In fact, as per the recent changes, a lot of companies have raised their LTCI premiums by almost 40%. On the other hand, Genworth the leading provider of long term care plans is due to increase premiums of their LTCI plans for women by 20% to 40% in April 2013.

An ideal candidate who would be the right fit for an LTCI policy should meet some of the characteristics as mentioned below:

  • Age: If you are between 40 and 80 years of age. This is not just a personal claim but as per the statistical data, 40% of the crowd having long term car insurance is under age 65.
  • Premium: You should be financially stable to pay premiums now and in the future.
  • You have built up assets which needs to be protected
  • You are in good health and a good medical history

Life expectancy is on the rise. Long term care insurance costs are increasing like nobody’s business. Main reasons are lower interest rates and increasing cost of care. A 55 year old unmarried person looking to buy long term care can expect to pay somewhere around $2,000 annually for $162,000 of current benefits. Same benefits will surpass $300,000 by the time he is 80. Average annual cost of assisted living is around $39,600 which has risen by more than 5% over the past 5 years. So, you cannot solely rely on social security benefits to take care of health issues in later stages of life. A good retirement plan should factor in the cost of LTCI from additional savings.


When Should You Purchase Long Term Care Insurance

The ideal range to purchase a long term care insurance policy is somewhere between 55 and 65 years of age. Although, as I mentioned earlier this policy is not limited to elderly seniors. According to Genworth, the youngest individual taking benefit of LTCI was 27 years old. A lot of people don’t consider it worth buying due to rising cost but same is applicable to health insurance plans and Medicare.


Who Should Not Buy Long Term Care Insurance

  1. Affordability is a question mark. If you cannot afford to pay the premium for long time then long term care insurance is not for you.
  2. You don’t have many assets to protect.
  3. You are totally dependent on social security benefits or supplemental security income for daily expenses.
  4. You are taking benefit of Medicaid.

If I have to summarize the right mindset to purchase a long term care insurance policy, then I would say buy it when you can easily afford to pay the premium without having to disturb your retirement savings to take care of it. Nobody can give an exact age as to when you will need care. There is no general rule of thumb so you need to assess your own situation based on all the factors mentioned above. If you have prepared to disturb your retirement savings to take care of long term care expenses then STOP and think again. You might be in a financial mess later on.

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