It would be nice if we all aged like fine wines. In some ways we do improve with age, however, despite advances in medical science many of us will still have chronic health issues develop sooner than later. While lifespan is still pushing many people to live to 80 and beyond, the quality of that life will impact savings, lifestyle and our families.
Many financial and insurance experts suggest we start planning for longevity when we are younger. Many of us plan for retirement by saving money in qualified accounts like an employer 401(k), IRA, SEP or 403(b). This is only one part of the equation. The financial costs and burdens of aging will negatively impact your assets and this your lifestyle.
Long-Term Care costs are very high. Most people don’t plan for these extended care costs. They incorrectly assume health insurance, Medicare or Medicare supplements will pay for these costs. Outside a small amount of skilled care these programs will not pay for the majority of long-term care services and supports we will need when we are older.
Other people think their spouse or adult children will be able to take care of their old age needs. This is not realistic as an older spouse will not physically be able to be a primary caregiver. Adult children have their own careers, spouses, children and responsibilities. Plus, do you really want them to perform the very personal tasks that are associated with long-term care? Few of us want that kind of burden to be placed on our family.
The solution for many is Long-Term Care Insurance. The problem is two-fold. The perception that the cost of the insurance is high. The second is too many people wait too long when health issues make it more difficult, costly or impossible to obtain coverage.
Long-Term Care Insurance is very affordable. Premiums are much more rate stable then in the past. Premiums are now based on the extreme low interest rate environment, low lapse rate (very few people ever cancel their policies for any reason) and conservative underwriting. Underwriting can be a big issue, especially if you wait until you are older and have several health conditions.
A just-released study conducted by the American Association for Long-Term Care Insurance (AALTCI – www.aaltci.org), a national consumer education group, reports that nearly half of individuals 70 or older who apply for Long-Term Care Insurance are declined coverage due to existing health conditions.
“Individuals mistakenly believe they can obtain Long-Term Care Insurance protection at any age,” explains Jesse Slome, director of AALTCI. “It is especially harder to health-qualify at older ages because our health changes and it rarely gets better as we age.”
The AALTCI released results of a study of leading insurance companies that offer Long-Term Care Insurance. The findings show the longer you wait the more likely your ability to get coverage decreases. About 44 percent of individuals age 70 or older who applied for coverage were declined.
“That means they took the time to work with an insurance agent who completed and submitted an application,” Slome notes.
These numbers only reflect those who actually applied for coverage. Often, when speaking with a Long-Term Care Insurance Specialist, they will advise the client to not apply if they already have evident health issues would they know would be cause for the insurance company to decline the application. While many general insurance agents and financial advisors ask few health questions, Long-Term Care Insurance specialists will so they can make proper recommendations based on age, health and other considerations.
“When health conditions already exist, the agent will typically advise the individual they will be declined and not spend time completing the application,” said Slome.
Even at younger ages there is a significant amount of people who are unable to get coverage. Often, it is a person’s change of health which motivated them to start looking in the first place.
“This year’s study found the percentage of declined applicants increased compared to the similar study conducted a few years ago,” Slome said.
“The decline rate for individuals between ages 50 and 59 was 22 percent in 2017 compared to our 2014 buyer study when the decline rate was 17 percent,” Slome notes.
The AALTCI study reports the decline rate for applicants below age 50 was 20 percent in 2017 compared to 12 percent in 2014.
“So many Americans take medications which mislead us to think we are in good health when we really are in good controlled health,” Slome adds. “It’s advisable to start thinking about long-term care planning in your 50s,” he advises. “That’s when costs are lower and, more important, you are far more likely to meet the required health qualifications. Once your application is accepted your coverage can not be cancelled even when your health changes, and it will change.”
A plan for longevity will help you have a successful future retirement. Long-Term Care Insurance can be a big part of that plan as you safeguard retirement funds while reducing the burdens placed on loved ones.
Start by discovering the current cost of long-term healthcare in your state. 44 states offer federal/state partnership plans which provide additional asset protection. Some states offer tax incentives on top of federal tax advantages some people enjoy. Find your state here: https://www.ltcnews.com/resources/state-information.
If you have existing health issues be sure to discuss them with a Long-Term Care specialist. There are products available which have less conservative underwriting criteria. These include limited duration plans and hybrid plans which combine life insurance or an annuity with long-term care coverage. Plus, every company has their own criteria for underwriting. Find a specialist who works with many of the top companies to help you find appropriate and affordable coverage.
The best time to plan is when you think it will never happen to you … when you are younger and enjoy good health. There is a long road from retirement planning until the end. Longevity will bring many bumps along the way. Those include health and aging issues and the costs and burdens that are created by them. Act prior to retirement and add peace-of-mind to your overall plan.