People don’t think about Long-Term Care Insurance. Probably because they don’t know about it … don’t understand what it can do … and besides, nothing’s going to happen to them.
I’ve spoken to literally hundreds of people over the years on this topic. These five things show up again and again as gaps in their knowledge:
1: Nobody really needs Long-Term Health Care Insurance. True or False?
FALSE. More people actually use Long-Term Care Insurance (LTCI) than any other kind of insurance coverage, except Life. (The reason, of course, is that 100% of people die.)
Statistic show that sixty-nine percent of Americans over 65 will need some type of long-term care in their lifetime!
17% will need less than a year of care
12% will need 1 to 2 years of care
20% will need 2 to 5 years of care
20% will need more than 5 years of care
Now here’s a shock: forty percent of those claims are made by adults under the age of 65!
Please don’t make the mistake of thinking that because you’re robust and healthy, you have no need for LTCI!
2: Most people who do buy a Long-Term Health Care Insurance just let it lapse after a while. True or False?
FALSE. People who buy these policies very rarely cancel or surrender it or let it lapse.
When the long-term care insurance industry was new, most insurance companies assumed that people would purchase LTCI, hold it for a few years, but then let it lapse. But it turned out that the opposite is true … in fact, it has the lowest surrender rate of any insurance product. People know a good thing when hey see one.
3: You don’t need this policy when you’re young. Wait until you’re older and closer to needing it. True or False?
FALSE. It’s better to buy an LTCI policy while you’re young, instead of waiting until you’re older.
First, the younger you are, the lower your premiums are. Your LTCI premiums at age 55, for example, are significantly lower than at age 75.
Let’s assume that Amos buys an LTCI policy at age 55, and Bill buys one at age 75. Now let’s say that when they reach age 85, both Amos and Bill have a claim. Amos has been paying his premiums steadily for 30 years, but Bill has paid his for only 10 years.
You might think paying over a longer time means that you pay more, but the answer is no. Because Amos bought at a much younger age, his premiums were so low that he actually paid less than Bill did.
The second reason is that Long-Term Care Insurance policies require a check of your medical history but not an exam (in technical terms, they are “medically underwritten”) – and there is a much higher chance of qualifying medically for the coverage at age 55 than there is at age 75.
4: Why bother? Long term care at home will be cheaper than a nursing home or group home. True or False?
FALSE. Home health care will probably NOT cost less than care in a facility or group home. Depending upon where you live in the United States, home health care (non-medical) averages about $25 an hour. For 24-hour care, $25 x 24 = $600 per day.
On the other hand, care in an assisted living facility averages about $120 per day – less than a quarter as much! – and care in a nursing home averages between $225 and $250 per day.
5: When I need it, the government will look after my Long-Term Care. True or False?
FALSE. The truth is that if you’re in care of the state and you outlive your liquid funds, the state has the power to seize your assets in order to keep paying the cost of your care.
When you buy a Long-Term Care Insurance policy, you actually prevent the state from doing this.
Arizona is one of the many states that subscribe to a long-term care “partnership,” that goes into effect when you buy an LTCI policy which meets the state’s partnership standards.
Bottom line: Don’t make those mistakes. And don’t wait. A good time to buy LTCI is when you’re around 50 to 55 years old. At that age the premiums don’t cost much, and – look at those statistics in Section 1 again – you’ll be adding a layer of protection that your family might seriously need.