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
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.