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Buy long-term care insurance early

By Jennie L. Phipps · Bankrate.com
Wednesday, May 11, 2011
Posted: 3 pm ET

Here's some more info on long-term care insurance, a retirement planning tool that is worth considering.

Jesse Slome, who is executive director of the American Association for Long-Term Care Insurance, a trade association whose members are long-term care insurance salespeople, commented on yesterday's blog about the rising cost of long-term care.

I said it was expensive for people living in retirement. He took exception, pointing out that compared to the $233,00 that the average three-year stay in a nursing home costs, the price of insurance -- about $4,000 per year for a couple in their 50s -- is modest.

The problem, he says, is that people look at long-term care insurance the wrong way. It's not an investment -- it's insurance -- and as he points out, you're unlikely to complain about not getting your money's worth from homeowners insurance because your house didn't burn down.

If you're thinking about buying long term-care insurance, don't dawdle. The older you get the more likely it is that you won't be able to buy it because of your health. Before an insurer will sell you a policy, you'll almost certainly be required to have a physical and the list of ailments that will result in your being declined varies from one insurer to the other. But overall, Slome says these are the average rates of decline:

  • Ages 70 to 79 -- 45 percent of applicants are declined.
  • Ages 60 to 69 -- 23 percent are declined.
  • Ages 50 to 59 -- 14 percent are declined.

No insurer will write a policy on you after you turn 80.

Here are a couple of other interesting tidbits Slome offered:

  • If you can qualify for a good-health discount initially, it will lower your rates permanently -- even though down the road, your health declines.
  • More than 70 percent of people who buy long-term care insurance are married. If that's your situation, shop around because some insurers offer discounts as high as 40 percent per person for married couples. That means that the second person pays only 20 percent of the total premium.
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7 Comments
toofine
June 13, 2011 at 7:13 am

Legaqlize rip-off. Buy young....cheap. Account moves (sold) 2-3 times and rates go up....You are buying into a black hole. These insurance execs are just taking your money. Happened to me. Rates so high you cannot afford to maintain.

Weiwen Ng
May 12, 2011 at 3:03 pm

It's true that if you're going to buy an LTC insurance policy, you should buy one as it's practicable. The problem is that we have stuff like mortgages, kids in college, retirement savings, and other things that make it impracticable for many people to commit at age 50 or earlier.

Jesse Slome
May 12, 2011 at 10:14 am

Ooops, one more point. A few insurers still offer policies to those over age 80. But, few (very few!) individuals can health qualify at that age and, if you are able, the premiums will be far more than most are willing to pay.

The best age to start looking into this is between 55 and 64 ... when you are most likely to still health qualify.

Jesse Slome
American Association for Long-Term Care Insurance

Jesse Slome
May 12, 2011 at 10:10 am

Thank you so much for shaving this important and valuable information.

One correction. According to our 2011 Price Index, a couple both age 55 would pay $2,350 a year (combined, not each) for protection that will provide $338,000 of immediate coverage ... but will grow to $821,500 of potential coverage when they reach age 85.

Long-term care insurance is not the easiest to navigate - which is why working with a knowledgeable professional is so important. By the way, virtually the same policy that costs $2,350 could be as low as $2,085 or as high as $3,970. Why such a difference? A range of reasons.

Bottom line, thank you for educating consumers. That is really the first step. Most people today use the Internet to learn more.

The Association has very detailed information on our website. Plus we can help put you in touch with one of those knowledgeable pros.

Thanks Jennie for a job well done.

Jesse Slome
Executive Director
American Association for Long-Term Care Insurance (AALTCI)