The True Cost of Waiting
Very often, people who are considering long-term care insurance believe they are best off waiting until some future date to make the purchase. The following table should set the record straight.
Let’s say a 55-year old is contemplating buying a long-term care insurance policy with a daily benefit of $200. The inflation option selected is 5% compound. If the 55-year old waits 5 years, he/she will not only have to buy the policy based upon the rates for a 60-year old, he/she will also have forfeited five years of compounding. The $200/day would have grown to $255/day, and this is the proper comparison. To retain the value in the contract, for every year you wait you need to buy an additional 5% of coverage. Therefore, the Cost of Waiting (solely based on the difference in age) is 25.3%, but the True Cost of Waiting (based on both difference in age as well as the increase in cost of care) is actually 60.0%.
Age |
The Cost of Waiting |
The True Cost of Waiting |
|
| From | To | ||
| 40 | 45 | 9.6% | 39.6% |
| 45 | 50 | 8.1% | 38.0% |
| 50 | 55 | 8.1% | 38.0% |
| 55 | 60 | 25.3% | 60.0% |
| 60 | 65 | 34.8% | 72.0% |
| 65 | 70 | 50.9% | 92.6% |
| 70 | 75 | 62.6% | 107.53% |
The above is based upon a MetLife VIP2 Ideal CT-Partnership policy with the following benefits: $200/day (monthly reimbursement) – 100% Home Care, 4 years benefit,
100-days E.P., 5% compound inflation, preferred rates, & spousal discount.