September 5, 2012

Long-Term Care Insurance Not Just for Elderly

Young claimants often collect for years, study finds

Younger people may buy a long-term care insurance (LTCI) policy so that they can save money on premiums, and seldom believe they’ll actually use it for many years to come. It’s a common perception that such coverage is for older people who suffer failing faculties due to their age. However, if disability strikes early, the benefits can sometimes be paid for years, according to a study released Wednesday by the American Association for Long-Term Care Insurance (AALTCI).

The study indicated that the youngest claimant began receiving benefits at age 24 on a policy he had purchased at age 21. The policy has already paid benefits for seven years. The youngest female claimant, at age 28, began collecting benefits less than 12 months after she purchased the policy, said Jesse Slome, director of AALTCI. In a statement, he said, “Within the same year, she needed care and qualified for benefit payments that have amounted to over $135,000.”

According to Slome, “People often mistakenly associate long term care solely with nursing home care required by the elderly. After purchasing insurance coverage, younger individuals have accidents and are diagnosed with health conditions that result in the need for care for months and often years.”

He cited the case of another early purchaser: “A male who purchased insurance at age 36 began receiving policy benefits at age 40. His claim has lasted over six and a half years, and the insurer has already paid out over $700,000.” According to the 2012 Long Term Care Insurance Sourcebook, the industry paid $6.6 billion in 2011 claim benefits to over 200,000 individuals.

Purchase of a policy at a young age can be substantially cheaper than waiting till, say, age 60. The association’s 2012 Price Index indicates that the premium for a policy that provides for $164,000 in immediate benefits with the option to increase overage in future years costs roughly $635 per year for a 25-year-old.

Younger people are apparently paying attention. Tim Kneeland, president of Transamerica Life Insurance Co., said in a statement, "The number of younger individuals purchasing long term care insurance on an individual basis and through their employer is growing."

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