A 64-year-old man is gearing up for retirement with $1.5 million in his 401(okay), a $2,000 month-to-month Social Safety verify and no debt past a $1,700 mortgage.
His diabetes is beneath management, however the actuality of getting older — and the potential for needing assist down the street — has him asking an enormous query: Ought to he purchase long-term insurance coverage?
It is a widespread query — and a superb one. Lengthy-term care insurance coverage (LTC) helps cowl the excessive prices of in-home care, nursing services or assisted dwelling in the event you need assistance with each day actions like bathing, dressing or consuming.
However this protection will be dear, and the older you’re whenever you apply, the extra you’ll pay. Continual circumstances could make it even more durable to qualify. As folks dwell longer, curiosity in one of these insurance coverage is rising. Is it actually value the price?
LTC insurance coverage premiums improve sharply as you age. A person shopping for a coverage at 60 would possibly pay $249 a month. By 65, that jumps to $313. At 70, the price is $410, and by 79, premiums common $676, in accordance with Mutual of Omaha [1] estimates for California.
For ladies, the curve is even steeper. By 79, month-to-month premiums common almost $1,300.
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Age 60: $249 / $425
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Age 65: $313 / $524
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Age 70: $410 / $662
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Age 75: $536 / $966
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Age 79: $676 / $1,296
These figures are only a information. Premiums fluctuate and rely upon components like age, gender, the place you reside and well being circumstances. Insurers set charges primarily based on threat. Older candidates pay extra as a result of they’re extra seemingly to make use of the advantages sooner. Ladies usually pay greater than males, partly as a result of they dwell longer and usually tend to want care.
Continual circumstances like diabetes don’t routinely disqualify you, however they’ll imply increased premiums — or denial if not well-managed. That’s why making use of earlier than age 65 and whereas in comparatively good well being is usually a good transfer.
Now let us take a look at the numbers for this case:
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401(okay) stability: $1.5 million
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Social Safety earnings: $2,000/month
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Mortgage cost: $1,700/month
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Estimated LTC premium (male, age 65): $313/month
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Annual LTC premium: $3,756
The premium would take about 16% of his month-to-month Social Safety profit and solely 0.02% of his 401(okay) stability, assuming no progress. It is noticeable however not overwhelming [2].
