MoneyMindedMoms: The True Cost of Waiting to Buy Long-Term Care Insurance

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The True Cost of Waiting to Buy Long-Term Care Insurance
Jun 10 2011 12:00 AM | Phyllis Shelton  in Protecting Your Family -----
I had to share a story of a mom who contacted me recently because she had just read Suze’s advice in The Money Class about the importance of long-term care insurance. At the beginning of the chapter, Suze makes it clear that she used to advise consumers to wait til age 59 to purchase long-term care insurance but now she believes that is the LATEST anyone should wait. That’s really great advice, and I was glad to have the opportunity to reiterate it with this mom. Here’s the story:

Rachel* is a 48-year-old single parent of two daughters in high school. She believes she should consider long-term care insurance before she gets any older, but money is tight with college just around the corner for her girls. Together we designed a plan that would meet her budget of $200 a month. She was in the middle of this shopping process when her older sister advised her to wait until she was almost 60. Here is what I explained to her:

“Right now you are considering a plan that has an initial monthly benefit of $4500 with an initial benefit account of $225,000 that is available after a one-time 90 calendar day waiting period with no charges required during that time. That means the plan will pay for 4.2 years if you use the entire monthly benefit every single month. Any month you are able to use the cash alternative benefit of 40%, the difference stays in your account and makes it last longer. The benefits will grow at 4% compounded annually. 5% is a little better but since it prices the policy out of your budget, you can wait and buy up to 5% at your attained age in a few years with no health questions. The premium for this plan is $199.64 and that is with a 10% preferred health discount.

The important thing to realize is if you wait 10 years to buy, you have to buy more coverage due to the cost of care increasing between now and then.

To buy the same amount of coverage at age 58, you would have to buy a $6500 monthly benefit with a $325,000 benefit account. That's what the $4500 will grow to in 10 years at 4% compound and to have 4.2 years of benefits, the $225,000 has to change to $325,000 ($325,000 ÷ $6500 = 4.2 years).

The premium for preferred health for that plan at age 58 is $338.95 and if you couldn't qualify for the preferred health discount, it would be $398.75. If you develop a serious health condition between now and then, there's a chance you wouldn't be able to qualify for coverage at all.”

Rachel decided to apply for coverage. It didn’t take her long to realize that paying 25 years of premium at almost $400 a month if she could no longer qualify for the preferred health discount would cost a lot more than paying 35 years at $200 a month.

{25 x $400 x 12 = $120,000 vs. 35 x $200 x 12 = $84,000}

*name changed to protect anonymity

Phyllis Shelton is the President of LTC Consultants, a Nashville-based consulting company specializing in long-term care insurance consumer education and training since 1991. She experienced first hand the implications of long-term caregiving with her grandfather, mother and brother. Because the need is so great, she is now focused on helping consumers who don't have a local agent acquire long-term care insurance. She can be reached at


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