insurance

Best age to buy long-term care insurance?

happy retired couple
Highlights
  • The earlier you buy a long-term policy, the less it will cost over time.
  • Waiting increases the risk you won't have coverage when you need it.
  • Seeking long-term care at a younger age boosts the odds you'll qualify.

For many people younger than 50, long-term care insurance seems like something to defer to the future.

"Most people won't ask about long-term care insurance at 45 -- it won't be on their radar," says Rich Arzaga, a CFP, founder and CEO of Cornerstone Wealth Management in San Ramon, Calif. "They'll ask about (long-term care) at the age of 55 or 60 when their parents are going through these issues. They don't have the fear of reality until they're over 55."

Who's buying?

Industry statistics back up this trend: 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.

Similar to a term life insurance policy, the earlier you lock in a long-term policy, the less it will cost over the long haul, says Wendy Boglioli, a spokeswoman for Genworth Financial, a major provider of long-term care policies.

"It's not about me being 80 or 90 -- at that point, I know I'm going to need help," Boglioli says.

Buy now, save later

Cost projections from Cornerstone Wealth Management show the value of adding long-term care to your portfolio at a younger age.

A married couple at age 45, for example, would now each pay $2,444 annually for a policy with a $200-per-day benefit ($6,000 per month) that kicks in right away for home care and after 90 days at a facility from Genworth. By age 80, each person would have paid $85,540, according to Cornerstone's math.

If the couple chose to take the $2,444 and invest it at 5 percent, they would have $14,180 saved by the time they turn 50 in 2016, Cornerstone calculated.

However, if at 50 they chose to buy a similar policy as the one they opted not to get five years earlier, the annual premium would be $3,797 each, and the net cost at age 80 would increase to $99,722, including applying the $14,180 in invested funds.

At 55, the annual premium would rise to $5,579 each, and the net cost at 80 would total $107,189, including applying $32,277 in invested funds, Cornerstone found.

By 60, the premium would zoom up to $8,197 each, and the net cost at 80 would be $108,563, offset by $55,375 in invested funds.

Waiting until 60 or later also increases your risk because you won't have the coverage in place before you might need the care, Arzaga says.

The advantages of youth

Another incentive to start young with long-term care is the greater likelihood you'll 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 get much more stringent when you get older," says Edward Graves, associate professor of insurance at The American College in Bryn Mawr, Pa. "Any time after 60, (insurers) start tightening the window. The longer you procrastinate, the harder it is to get the coverage."

For qualifying purposes, family history doesn't matter, only your own health. But if you have a chronic condition, such as Parkinson's disease or Alzheimer's disease, you will be rejected, Boglioli says.

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