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.