Understanding the Age Limit for Purchasing Long Term Care Insurance
When considering long term care (LTC) insurance, one of the key factors to consider is the age limit set by insurers. Most insurers offer coverage until a certain age, often around 84, but there are exceptions and alternatives available.
Discretion of Insurers and Common Age Limits
The age limit for purchasing LTC insurance is ultimately determined by the discretion of the insurer, with state insurance commissions providing approval. One of the most common age limits seen in the industry is 84, indicating that many providers do not extend coverage beyond this age.
The Cost Factor Influencing Age Limits
Insurers determine the premium rates based on the risk of a claim occurring. As individuals age, the risk of needing care increases, leading to higher premiums. Therefore, it wouldn't make financial sense for insurers to offer coverage to older individuals at a lower rate than the potential payouts they might face.
Exceptions and Alternatives
However, there are some exceptions. A major traditional LTC carrier still offers coverage up to age 79, which is somewhat unusual given the trend towards more restrictive policies.
In addition, hybrid products such as Life LTC plans and LTC annuities are also available, extending coverage potentially beyond age 80. These hybrid products often provide coverage based on life expectancy and health conditions, allowing for flexibility in meeting individual needs.
Practical Concerns and Limited Coverage for the Elderly
Moving further back in history, older age limits such as 99, 89, and 84 were common. However, with the rapid advancement in medical technology and the increasing life expectancy of individuals, many insurers are now finding it increasingly difficult to justify coverage for those significantly above 79. The practical concern is that an insurer might not receive sufficient premium income over just a few years to cover potentially hundreds of thousands of dollars in claims.
Specialized Coverage for Those Already Receiving Care
A significant development in the LTC insurance market is the availability of coverage for individuals who are already in need of care. These plans use medical records to determine the individual's life expectancy and adjust the premium rates accordingly. This allows individuals needing immediate care to purchase coverage while managing their financial risks effectively.
For example, some individuals have used reverse mortgages to pay for the premiums on these plans. This strategy not only ensures that they can access necessary care but also leaves some funds available to inherit, rather than facing the financial risk of depleting their entire nest egg.
One inspiring example is the situation where a reverse mortgage was used to pay for LTC insurance, allowing someone to live out their last years at home with dignity and leaving some funds behind as an inheritance, rather than inheriting a nursing home and Medicaid and no assets.
Conclusion
While the age limit for purchasing LTC insurance is largely driven by the insurers' risk management strategies, there are some alternatives and niche markets that cater to specific needs. Understanding the nuances of these options can help individuals make informed decisions about their long term care planning.