5 Myths That Prevent People From Purchasing Long-term Care Insurance

Many people avoid the issue of long-term care because of long-held myths regarding the use of LTC insurance as an option. Many of these myths surround the issue of who is or is not a good candidate for LTC insurance. The 2 most prevalent myths pertain to the “best” age for a person to begin planning (most people believe if they’re young, they do not need to plan for long-term care), and a person’s net worth (some people set an upper-end dollar net worth at which people should automatically self-insure). Once these myths are analyzed and understood, it becomes clear that everyone should be educated about the importance of planning for a future long-term care need.

Myth #1: If I am wealthy enough to rely on my own assets to pay for long-term care, then that’s what I should do.
This is no different than saying that if I can pay more taxes, I should pay more. Wealthy people are delighted when they discover strategies to lower their tax bill. But they often fail to understand that by paying insurance premiums, they could potentially avoid hundreds of thousands of dollars in long-term care expenses. It’s important for you to understand that the acceptability of a catastrophic long-term care risk does not depend on the size of your portfolio alone. You need to know how your portfolio and estate will be impacted by a long-term care event. Once you have this information you can then decide whether it is an acceptable risk to take, or to choose another option for paying for your care.

Myth #2: I can ignore LTC Planning because I won’t need long-term care anytime soon.
We normally don’t hear about young people needing long-term care or being diagnosed with a disease that will eventually require long-term care, but can it happen? While it’s true that most care takes place after age 80, it’s important to consider the fact that younger people can need care, such as in the case of Michael J. Fox and the late Christopher Reeve. You could find yourself needing long-term care within a few months from now. It’s better to plan ahead for long-term care many years too early than one day too late.

Myth #3: I’ll pay less if I wait to purchase LTC insurance.
Most people are surprised to see the similarity in total cumulative premiums paid over time, regardless of the age at which LTC insurance is purchased. The 2 charts below show that at virtually all ages, even factoring in the time value of money, the younger a person is when they purchase LTC insurance, the lower the premium will be on both an annual and cumulative basis.

Myth #4: As long as I’m willing to pay the higher premiums, I can wait to purchase LTC insurance.
While waiting until some ill-advised “perfect age” to buy, you could suffer a debilitating accident or be diagnosed with a disease that makes you uninsurable. The Underwriting Screen Failures chart below shows the number of people who fail to pass LTC insurance underwriting in the 60-64 year-old age group is nearly double that of the 40-44 year-old age group.

Myth #5: I’m better off investing the money that would be used to pay for long-term care insurance.
This may be true if you need long-term care for only a few months. If you calculate a rate of return of 6% on $1,800 (average annual premium for a younger person), in 25 years your invested premium will have grown to $103,984. Unfortunately, with the cost of care averaging $160 per day (on the very low side!), and increasing at an annual rate of 5%, the account will only pay about 7 months of long-term care with the accumulated “savings”. And what if you have an accident or develop an illness that requires years of long-term care beginning shortly after you start this investment account?

Chapter 1 of my book, "How to Plan for Long-Term Care", provides you with a good beginning for learning about this issue. Please email your name and email address to allen@superiorltc.com, and I'll send you a complimentary e-copy.

(c) Copyright –Allen Hamm. All Rights Reserved Worldwide.

By: Allen Hamm

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