Should Young Clients Think About LTCi Now … Or Should They Wait?

Your young clients (and quite possibly you too) probably wonder if it makes sense to buy LTCi now or wait. That’s an individual decision, of course, but there are a number of factors all clients should consider:

1. The high cost of waiting. The younger your clients are when they purchase LTCi, the lower the premiums over the life of the policy. This varies by policy type, but as a general rule, if your clients are 45 years old now and they wait 20 years to buy a policy (age 65), it’ll be about 3.5 times more expensive. There are two reasons for that: 1.Premiums are based on age at time of application, so since they’re older, premiums will be higher; 2. They’ll need to take a higher daily benefit to keep pace with inflation.

   
   Here's an example of what waiting can cost your clients.

   Maria and Norm bought their policy in 2003. They recently got a premium increase notice. Their advisor asked us to review their options:

   

   Even with the rate increase (by tweaking a few benefits), the cost of a new policy far exceeds the cost of their original policy.

   And when you compare premiums paid versus benefits received when care is needed, the LTCi benefits paid out almost always exceed premiums paid in¹:

   

2. Rate classes: People's health is usually better at a younger age. If they apply now, they’re more likely to get preferred rates, locking in “good health rates,” which equals significant savings over the life of the policy.

3. Insurability: Underwriting standards change over time, as does our health. Waiting to plan can be a costly mistake; a change in health can make your clients ineligible for LTCi, no matter how much money they’re willing to pay.

   

   
   

4. Spouse discount: Spouses may become ineligible for coverage because of poor health. The spouse who stays healthy may only qualify for a reduced “spouse not applying” discount or none at all, compared to the full “spouses applying together” discount. 

5. Assets: Buying long term care insurance now can protect them later.

6. Choices & Independence: Long term care insurance gives your clients greater choices and control over where they receive care. Most people prefer to stay at home as long as possible. Claims data shows about 50% of care is now being received at home.

7. Linked Benefit plans (Hybrids): Your youngest clients are more likely to choose a combination product and so are higher income groups. And 1 in 4 people already covered by individual insurance would be very or extremely likely to choose a combination product if shopping for more. Clients with permanent insurance might be particularly interested in a Hybrid Life/LTCi policy since they may be able to roll their current cash value into a combination policy.²

   

As fee-only financial advisors (FOFAs), you know part of the problem is that most people don’t even begin to think about planning for their advanced years until they are near retirement; the median age is 58-59. Long term care is part of that planning. It doesn’t cost your clients anything to run the numbers and find out how much LTCi protection costs them now and will save them in the future. Jill MacNeil, our long term care insurance specialist, is here to help. 

¹LifePlans Study of Long-Term Care Insurance Claimants

²2016 Insurance Barometer Study (Life Happens & LIMRA)