Our full 18-page report on long-term care insurance
is available at no cost. To request a FREE copy
e-mail us at info@LongevityFC.com
An analysis of long-term care insurance policies
with the goal of finding a better value-for-money solution
About 70 percent of people over age 65 will require some type of long-term care (“LTC”) services during their lifetime. Don’t take our word for it, that’s the U.S. government talking (actually the DHSS clearinghouse for long-term care information
at www.longtermcare.gov). That’s a scary number. Surely anyone contemplating their senior years should rush out and buy a long-term care policy?
Our research suggests that standard LTC policies are generally not good value for money if you are in average or above average health. That’s calculated by weighing the benefits likely to be received against the premiums paid for those benefits, taking into account the probability of whether and when you’ll actually qualify for LTC benefits over your lifetime. LTC policies are only a good deal for folks who are in significantly below average health, and hence more likely to claim. But insurance companies spend a lot of effort weeding out and rejecting those applications.
But here’s the dilemma. Even if LTC is poor value for money, most healthy individuals do need LTC coverage to reduce the risk of financial hardship and potential ruin. Even in today’s dollars, LTC needs could run $40-50,000 a year. And while the average claim may last only eighteen months, between 10 and 20% of LTC claims can last over six years and some of those can go ten years or more. For most people that level of potential expense likely represents a very large dent is accumulated savings, or even total financial ruin. There’s a real need to insure against that. Unfortunately, 90% of LTC policies max out their coverage at six years or less!
To quote Charlie Brown of Peanuts fame: “Aaugh!”
But please don’t give up. There is a better solution, especially for those who enjoy above average health.
Our research paper “Long Term Careless?” takes a detailed look at handling the considerable financial strains of long-term
care and answers the questions individuals and their advisors need to ask:
In “Long Term Careless?” we provide analysis, statistics and reasoning behind our conclusions and recommendations. The full report is available for FREE by emailing us at info@longevityFC.com. (Using our own analytical techniques we are comfortable claiming this a GOOD DEAL for readers!). The next phase of our research is development of a program that can personalize the analysis of these policies to each user’s age, gender and health/lifestyle factors. We do intend to charge a modest fee for that, but will offer it first and at a discounted price to all those who have emailed us requesting the full version of “Long-Term Careless?”
Acknowledgements and Disclosures
We are happy to acknowledge the contributions made by a number of individuals and organizations in providing ideas and data that helped with the development
of this research project, and with challenging its analysis and assumptions. Thanks to Kim Lankford and Susan Garland of Kiplinger’s Retirement Report, Sharon Epperson and Judy Gee of CNBC, Aaron Skloff of Skloff Financial Group, Rich LaVoice and his colleagues at Symetra Financial, Jennifer Round of New York Life,
Jim Perry of MetLife, George Graziani of Swiss Re, Evelyn Brust of the Evelyn Brust Foundation, Iris Meadow formerly with Genworth, and the staff and Advisory Board at the Brandes Institute. All errors and omissions are the responsibility of Longevity Financial Consulting LLC.
Longevity Financial Consulting LLC does not sell or endorse any investment or insurance products, nor does it receive fees or commissions from any of the
insurance providers mentioned in this report. All comments in this and other publications of Longevity Financial Consulting LLC are for educational purposes.
Content copyright ® 2012 LONGEVITY FINANCIAL CONSULTING, LLC. All rights reserved.
Why Is Longevity Important?
For anyone around retirement age you should be pleased to know that on average your chance of reaching age 90 is about double what it would have been if you had been born a generation earlier. Human longevity has been increasing fairly steadily over recent decades due to improvements in medical science as well as lifestyle and environmental factors.
This may make you feel better. And so it should, assuming you relish the idea of a longer lifespan. Then after a brief glow of
self-satisfaction your thoughts move onto another topic. But the increase in longevity is much more than a “feel-good” factor. Understanding the concepts and applying easy to-find information can make a dramatic difference in your financial decisions today with far-reaching results for decades.
First let’s be clear about the concepts behind measuring and applying longevity calculations. Longevity calculations forecast estimated future lifespan based on averages of a large population. Neither forecasts nor averages provide specific results at the individual level. But the two concepts of forecasts and averages are quite different in their application and usefulness to
Forecasts in the longevity field have an unusual characteristic compared to forecasts in economics or the stock market.
They’re much more likely to be usefully accurate (which admittedly is different from totally correct). Trends in medical science improvement and lifestyle tend to be persistent and of long duration. We don’t know exactly what advances will occur or when specific gains may be made, but in aggregate the direction and pace of advances are relatively stable.
Ask a dozen actuaries how the likely average longevity of 80-year-old Americans will change over the next decade, and you’ll
get a much narrower range of estimates than if you ask a dozen stock market “mavens” to forecast the move in the S&P500 in the next year. Unfortunately this is not because actuaries are innately better forecasters; it’s in the nature of the forecast. These actuarial forecasts are reflected in the pricing of financial products that depend in any way on life expectancies. For individuals and institutions that includes annuities, insurance and liability-related products.
While there is scope for identifying and using better longevity forecasts on an institutional basis, the real opportunity to improve financial decisions for individuals is in the use of averages, the second concept inside those longevity calculations.
Would you like to take advantage of some inside information? If you’re employed in the financial industry, a question like this should have you reaching for the phone immediately to call your Compliance team! But in longevity estimates, every individual has inside information….literally. The information inside you, about how you differ from the average (physically, mentally, and in terms of lifestyle or environment) can provide critical assistance in making major financial decisions. Knowing how an individual’s personal life expectancy varies from the average can be the difference between finding the right financial product at a great price, and making an expensive mistake that lasts literally for a lifetime.
We’re told that “buying a house” is the biggest financial decision that most people make in their lifetime. For the baby-boom generation approaching retirement, that’s not true. Their biggest financial decision is whether to turn a retirement lump sum into a lifetime income stream. Unlike buying a house, that may be an irreversible decision. And the value of a $100,000 lifetime annuity for a typical 65 year-old can be well over a million dollars. That’s quite a bit more than the average house, especially in today’s market! And unlike buying a house, most retirees are singularly ill-equipped to understand the calculations behind that decision, and are highly dependent on good advice.
The “inside information” gained from taking a short (and non-invasive!) test to improve the estimate of your specific life expectancy can make a big difference in financial decisions. How do you get that information edge? Take a LongevitAge test: you can find one in the LongevitAge section of the Longevity Financial Consulting website. Because of individual health and lifestyle factors, everyone’s life expectancy is different from the average of others the same age and gender. LongevitAge is your actual age, adjusted for that difference.
With better information on your LongevitAge and on future life expectancy, you can review many financial decisions through a different lens, one with the odds on your side; understanding when the odds are in your favor can be very profitable. Armed
with that information, here are six decisions that you can improve:
Source note: Mortality statistics sourced from the Human Mortality database at mortality.org, 1974-2007, as of February 2012
Content copyright ® 2012 LONGEVITY FINANCIAL CONSULTING, LLC. All rights reserved.
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Why is Longevity Important?