Ltc < 60 ?

[crimsontideagent]

I've read on a couple other threads/forums statements like--

Disability before 60, then drop DI and get LTC...

Is there a cut and dry line like that... I always thought that at 50 or so, start thinking LTC that you can pay up at 65.

 

[bluemarlin08]

Seems to me as early as cash flow allows.

 

[crimsontideagent]

Seems to me as early as cash flow allows.

Me think so too -

I've got a business client who is 53, spouse 54, I was thinking at their age does DI make sense or LTC and have it paid up at 65...

 

[Newby]

They are two different animals. Disability replaces part of your income if you can't work. LTC pays for assistance if you can't perform the activities of daily activity (dressing, bathing, eating, mobility, etc.)

You actually need them both but disability comes first during your working years.

One of the threads you read that in was my post about explaining Dave Ramsey's plan to a client. I explained it the way he does (Buy LTC after age 60) which I disagree with. People should buy LTC as young as they can afford it IF they have their other insurances in place first (health, life-if needed, disability).

 

[crimsontideagent]

They are two different animals. Disability replaces part of your income if you can't work. LTC pays for assistance if you can't perform the activities of daily activity (dressing, bathing, eating, mobility, etc.)

You actually need them both but disability comes first during your working years.

One of the threads you read that in was my post about explaining Dave Ramsey's plan to a client. I explained it the way he does (Buy LTC after age 60) which I disagree with. People should buy LTC as young as they can afford it IF they have their other insurances in place first (health, life-if needed, disability).

That's exactly where I read it and I took note because I've read enough of your threads to respect your opinion.

More specifics - they are 54 husband and 53 wife, both work in the business (realtor owners) - she wants to retire and will at 60, he probably at least 65... I wanted to have them paid up at 65 so I thought LTC would be a nice benefit for them paid up when they retire, but now I am thinking maybe DI isn't bad ideas with that much more time to work...

 

[Newby]

Ideally they need both. But if they can only swing one it would be disability unless they have enough saved up that they COULD retire now IF they wanted to.
The lack of disability insurance risks them being financially damaged before they have enough to retire on.
The lack of LTC risks them spending all their assets toward the end of their life. There are many cases where people need LTC at younger ages though.

 

[scagnt83]

If they are still working the DI is critical. What happens when they are disabled and they cant pay that LTC premium??
Then they are double screwed!!!

Hypothetically, LTC should be the last insurance policy bought. Yes, its better to get it younger rather than older. But not at the expense of other insurance or at the expense of not contributing to your retirement savings.

Before age 45 the difference in premiums by age is not much at all. Unless there is a high chance of being uninsurable in the future (because of family history, or current medical conditions that could become more serious) I usually dont recommend buying any earlier than 45.
Before this, that money is much better off in a retirement account!

Of course there are people on here who will disagree with me all day long! Many of them will not be securities licensed and the only way they would get paid in that scenario is to convince the under 45 year old to buy LTC.... so of course they will disagree with me.... lol
But statistically its best to wait until after age 45.

As far as Dave Ramsey's "perfect world" scenario of waiting until 60 and dropping DI for it:
That might work in a perfect world. But this world is far from perfect.
Plus, over 60 you get into problems with insurability and high rates.
45-60 are the magic years for LTC imo

 

[bobson]

If they are still working the DI is critical. What happens when they are disabled and they cant pay that LTC premium??
Then they are double screwed!!!

Hypothetically, LTC should be the last insurance policy bought. Yes, its better to get it younger rather than older. But not at the expense of other insurance or at the expense of not contributing to your retirement savings.

Before age 45 the difference in premiums by age is not much at all. Unless there is a high chance of being uninsurable in the future (because of family history, or current medical conditions that could become more serious) I usually dont recommend buying any earlier than 45.
Before this, that money is much better off in a retirement account!

Of course there are people on here who will disagree with me all day long! Many of them will not be securities licensed and the only way they would get paid in that scenario is to convince the under 45 year old to buy LTC.... so of course they will disagree with me.... lol
But statistically its best to wait until after age 45.

As far as Dave Ramsey's "perfect world" scenario of waiting until 60 and dropping DI for it:
That might work in a perfect world. But this world is far from perfect.
Plus, over 60 you get into problems with insurability and high rates.
45-60 are the magic years for LTC imo

What statistic can you provide that it is 'best' to wait untl after age 45?

 

[scagnt83]

What statistic can you provide that it is 'best' to wait untl after age 45?

A combination of claims history for carriers, statistics from independent studies, and common sense about the reality of the majority of clients. But ultimately its a case by case call.
The OP was a generalized question, so it can only receive a generalized answer...

There are so many different studies out there Im not going to go find one and give a link, just google it if you want something specific, there are tons of them out there from insurance companies, the government, and independent research groups.
Read the research and make your own conclusions. Or take a CE course or two on LTC, there are plenty of statistics on LTC in them if you pay attention.

Major carriers claims history shows that age 59 or younger claims only account for around 5%-6%. I have been told this from carriers and wholesalers many times before.

Both independent and government studies show that the majority of LTC claims are over age 60.

Time value of money , compounding interest, and the proper allocation of a clients income plays a huge part in the decision as well; and is the most important thing to consider along with a clients current health and any unusual family history.
ex:
- At age 35 a client might spend $200/month for a LTC policy.
That $200/month invested for 10 years (until age 45) at 6% would be $33K in 10 years, $107K in 30 years at age 65 (if LTC was bought at 45 and the $200 was switched to LTC premium).

- At age 45 a client might spend around $240/month for a LTC policy. So If you had bought at 35 instead you would only have saved around $40/month.
This $40/month invested at 6% would only be $40K in 30 years.

Thats a lost opportunity cost of $67,000. And thats only by age 65, it keeps growing exponentially..

Because of compound inflation and the time value of money the younger years are the most important times to save for retirement. Most clients are already not saving enough for retirement.
The majority of 45 year olds are still insurable for LTC, to purchase so early for such a small price difference is irrational in the majority of cases.

LTC would only be appropriate for someone under 45 if they had sufficient LI (term & permanent), DI, HI, is contributing at least 10% of their income to retirement savings, and has a CI policy. Only then would I usually start to recommend LTC if there was money left over.... unless there was some unusual situation with a clients health or family history.

Again, this is all speaking in generalizations. Insurance is a case by case evaluation process.

 

[bobson]

A combination of claims history for carriers, statistics from independent studies, and common sense about the reality of the majority of clients. But ultimately its a case by case call.
The OP was a generalized question, so it can only receive a generalized answer...

There are so many different studies out there Im not going to go find one and give a link, just google it if you want something specific, there are tons of them out there from insurance companies, the government, and independent research groups.
Read the research and make your own conclusions. Or take a CE course or two on LTC, there are plenty of statistics on LTC in them if you pay attention.

Major carriers claims history shows that age 59 or younger claims only account for around 5%-6%. I have been told this from carriers and wholesalers many times before.

Both independent and government studies show that the majority of LTC claims are over age 60.

Time value of money , compounding interest, and the proper allocation of a clients income plays a huge part in the decision as well; and is the most important thing to consider along with a clients current health and any unusual family history.
ex:
- At age 35 a client might spend $200/month for a LTC policy.
That $200/month invested for 10 years (until age 45) at 6% would be $33K in 10 years, $107K in 30 years at age 65 (if LTC was bought at 45 and the $200 was switched to LTC premium).

- At age 45 a client might spend around $240/month for a LTC policy. So If you had bought at 35 instead you would only have saved around $40/month.
This $40/month invested at 6% would only be $40K in 30 years.

Thats a lost opportunity cost of $67,000. And thats only by age 65, it keeps growing exponentially..

Because of compound inflation and the time value of money the younger years are the most important times to save for retirement. Most clients are already not saving enough for retirement.
The majority of 45 year olds are still insurable for LTC, to purchase so early for such a small price difference is irrational in the majority of cases.

LTC would only be appropriate for someone under 45 if they had sufficient LI (term & permanent), DI, HI, is contributing at least 10% of their income to retirement savings, and has a CI policy. Only then would I usually start to recommend LTC if there was money left over.... unless there was some unusual situation with a clients health or family history.

Again, this is all speaking in generalizations. Insurance is a case by case evaluation process.

There are statistics, damn statistics, and lies.

Saying claims for ages under 59 make up only 5-6% of claims is not much of a statistic without knowing what percentage of policies are sold to those under age 59.

I do know 16.7% of new nursing home admissions in Arizona are under age 65.

Now I'm not advocating anyone should buy LTC at any age. I'm just saying that throwing out statistics without all relevant data is pointless.

The facts are these. There are plenty of permanent chronic illnesses that can strike people at any age. I know plenty of people with MS in their 40's, one that recently turned 30 who was diagnosed 5 years ago. I also know a couple of parapalegics and one quad. Everyone of them could have used an LTC policy.