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Beating the high cost of waiting

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Q: I sell long-term care insurance policies to prospects of all ages. But what is the best age to purchase this coverage?

A: One of the secrets in this industry is a factor called “the high cost of waiting.” It means that the younger you are when you purchase the policy, the less you pay over the lifetime of the policy.

So when is the best time to apply for this coverage? If you have a lifestyle or assets to protect, you should try to qualify for this coverage now. If you wait until you begin to get sick, you either won’t be able to get a policy, you will be limited to getting less coverage, or you will have to pay a higher premium. The healthier you are, the less you pay because you can probably qualify for a preferred rating.

Here’s a good guideline to use. It may vary by specific policies, but, overall, if you are 45 years of age now and you wait until you are 65 to buy, it will be three times more expensive. There are two reasons for that.

First, because the premium is based on your age at time of application. Since you are older, it will be higher. And, second, you will need to take a higher daily benefit to keep pace with inflation.

In my client presentation binder, I have a page summarizing this concept. It has two columns — one is titled “NOW” and the other column is titled “WAITING.”

A significant portion of my book of business was written on 49-year-olds soon to turn 50. When I received an invitation to a 50th birthday party, I called the friend to RSVP and mention this was the best time to apply for an LTC policy. Not only did she buy a policy, she told her husband and friends — so it was a great way to get referrals.

What about prospects who are in their 30s and early 40s? Although from a “now versus waiting” perspective it makes sense, from a lifecycle vantage point they are probably more concerned about purchasing other types of insurance. For example, they are starting families and purchasing homes, so they will be buying life insurance, etc. Although it could make sense to mention LTC to them — and asking if their parents have purchased this coverage — they would not be as profitable for prospecting as other ages, such as those in their late 40s and 50s.