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A study of over 250,000 individuals who purchased long-term care insurance last year (2007) reveals the significant benefit of starting the planning process in your 50’s, prior to reaching retirement age.
Research conducted by the American Association for Long-Term Care Insurance (AALTCI), the national professional trade organization, examined data from ten leading insurers. The study focused on two primary areas: the percentage of long-term care insurance applicants who qualified for preferred health discounts that would allow them to pay lower premiums, and the percentage who did not qualify for insurance as a result of an existing health condition and therefore were unable to purchase the coverage.
According to the study, policy costs generally increased slightly compared to the prior year. “The cost of long-term care insurance is directly linked to interest rates, the anticipated likelihood of claims as well as care costs,” explains Jesse Slome, Executive Director of AALTCI. “When interest rates decline as they have in recent years, insurers need to increase premium costs. And as our society ages, more people will require long-term care that becomes more costly each year.”
While insurers can decline individuals who apply for coverage with existing health conditions, most reward those who apply while in relatively good health. “Just over half (51.5%) of individuals who applied and were accepted for coverage last year between ages 50 and 59 qualified for ‘preferred health’ discounts,” Slome explained. These discounts can reduce the cost of long-term care insurance by ten to twenty percent each year. “The savings can amount to hundreds of dollars a year for a couple,” Slome adds, “and they won’t be taken away in the future should their health change.”
More than eight million Americans currently have long-term care insurance protection either individually or through their employer, according to the Association’s 2008 Sourcebook data. “Some 400,000 people obtained coverage in 2007,” Slome states, “and 83% of individuals purchased it before age 65. But clearly, many people still wait too long to start the planning process only to discover they can’t qualify for the coverage no matter how much they are willing to pay.”
The number of individual applicants who qualified for good health discounts in 2007 rose for most age-bands compared to the Association’s 2005 study. Just over two-thirds (66.8%) of applicants between 40 and 49 qualified for the discount in 2007 compared to 53.7% in 2005.
Insuring Health Is Part Of Retirement Planning
Planning for long-term care is similar to retirement planning. The sooner the process begins, the less costly it is each year to reach the destination. The younger you are, the lower your premiums. The other significant advantage is that individuals are healthier and when it comes to qualifying for insurance, health matters more than money.
Each insurer establishes its own criteria for acceptable health conditions. In a similar manner, discounts and insurance rates can vary significantly based upon your age, marital status, and health. “It pays to speak with a knowledgeable long-term care insurance professional who can offer coverage from more than one carrier,” Slome advises. “The difference in cost can be as much as 30% or more annually and since it rarely is advantageous to change policies, it pays to get the best coverage for the best price from the onset.”
For smokers or those individuals whose health is less than perfect, begin the planning process with a long-term care specialist who understands which specific health conditions various insurers will accept. You’ll need the names and dosages for all prescription medications, current medical conditions, height, weight, and a brief health history. You also need to be truthful so that the professional can match your health conditions with the best company. “No one wants to hear they are declined,” says Slome, “especially because once you are declined by one insurer, you may find it impossible to get coverage from anyone.”
Percentage of Applicants Who Qualify for Good Health Discounts
Age 40 to 49 63.2%
Age 50 to 59 51.5%
Age 60 to 69 42.2%
Over age 70 less than 24%
Percentage of Applicants Declined Individual Policy Coverage
Age 50 to 59 13.9%
Age 60 to 69 22.9%
Source: American Association for Long-Term Care Insurance, June 2008 Study of 250,000 individual LTCI policy applicants (2007 and 2008 data)
Compare The Costs Of Insurance At Different Ages
According to AALTCI data reflecting the 2008 Long-Term Care Insurance Price Index, a 55-year-old individual (note that rates are based upon age and not gender) considering long-term care insurance can expect to pay $709-per-year for a base level of protection if he or she is married or $1,095 if single. These costs increased about four percent compared to the prior year’s report.
The index measures current costs for the top-selling long-term care insurance policies that offer consumers approximately $115,000 in current benefits. The value of that coverage grows to over $305,000 of protection in 20 years. This is for a very basic level of coverage and is not intended to provide comprehensive benefits.
Many consumers mistakenly believe that long-term care insurance protection is costly; available discounts, however, can significantly reduce the cost of coverage. Many individuals who apply for long-term care insurance qualify for good-health discounts that will reduce the annual cost by ten percent or more. The savings are locked in even if the health of the individual changes in the future.
Other discounts are offered to people who are married; some companies even give the discount when two people are living under the same roof, or when only one party of a couple applies or when only one is approved when both apply. The total savings can be as much as 40% each year.
The study revealed the following average prices in the 2008 report (all figures include a provision for an inflation benefit that increases the coverage by five percent compounded annually):
Age 55 Married
$709-per year for a 3-year policy; $115,000 immediate benefit value ($305,000 value in 20 years) when the individual qualifies for both preferred health and spousal discounts.
Age 55 Single
$1,095-per year for identical coverage without the spousal discount.
Age 65 Married
$2013-per year for a 3-year policy, $172,600 immediate benefit value ($458,000 value in 20 years) when the individual qualifies for both preferred health and spousal discounts.
Age 65 Single
$2999-per year for identical coverage without the spousal discount.
For additional information about this study and other information, see American Association for Long-Term Care Insurance.
