Should I buy Long Term Care Insurance at 40 years old?

One thing I’ve noticed in the past few years is that the age of my prospective clients is getting younger and younger.  Years ago it seemed like everybody I was meeting with was “grandparent” types and closing in on that magical moment of retirement.  With better public awareness happening, now I’m often discussing the benefits of a Long Term Care Insurance policy with the last of the baby boomers and Gen Xers.

So what is the correct age to purchase a Long Term Care policy at?  None of us have a crystal ball to determine the precise moment the day before you should apply.  Some financial planners and industry gurus suggest 60 years of age, others say 50 is the magical age, and now we are even reading about planners and insurance agents suggesting 40 years old is not too young. 

Remember, we all have to health qualify for a policy.  With medical records becoming more reliable due to technology and medical testing being able to diagnose future problems at an earlier age, 40 is no longer too young to apply.

A benefit of purchasing a policy while you are younger is that most likely you will be healthier the younger you apply and your premiums will be lower.  Of course, you’ll pay premiums for a longer period of time, but your peace of mind will be intact.  Many agents report having clients in their thirties!

I read a great piece on Dan Blankenhorn’s blog regarding his friend that suffers from Parkinson’s Disease and thankfully has a policy in place.  You can read that story here at Dan’s Blog.

Long Term Care Insurance inflation protection is a must have

This week I was filling out an application with a husband/wife when we were reviewing the inflation protection option.  They told me about their parent’s (in their 80’s) who purchased a policy years ago with ony $80/day coverage.  I said that should be fine as long as they have inflation protection attached to the policy…which unfortunately is not. 

Inflation protection is one of those “must haves” on almost all properly designed Long Term Care Insurance policies.  A good rule of thumb is to select 5% compound inflation if you are purchasing a policy under the age of 70 years old.  If you are over 70 years old when purchasing your policy then 5% simple interest is fine.

Inflation protection will increase your daily benefit thus increasing the total “pool” available in your policy.  For example, if you purchase $200/day now with 5% compound inflation, then next year you’ll actually have $210/day coverage.  The following year that $210/day will increase by another 5% and so forth.  With the increasing cost of health care and long term care, properly designing a policy today can save you from disappointment 20 years down the road.

Long Term Care Insurance policy International coverage

If you live in the United States and own a Long Term Care Insurance policy from one of the larger carriers you probably have an International Coverage clause.  This built in rider will typically cover you for up to 70% of your daily benefit.  The term of the coverage will limited to a specific amount of time that may differ dramatically from your US coverage.  730 days is a common limit length for coverage that most carriers provide.

The intent of this rider is to protect you while traveling.  Let’s say you take a vacation to Europe and while in London you become ill and suddenly you need help with performing two of the seven ADL (Activities of Daily Living).  After your elimination period is satisfied (deductible) you’ll start to receive benefits at 70% of your daily US benefit amount and again, for a limit of 730 days (2 years).

This is a nice benefit to have but if you plan on retiring to another country it’s a good idea to consult with your insurance carrier and review specific coverage options.