Long-term Care Insurance and Life Insurance

[thatgirlmjl]

I'm 26 years old and healthy. I am debt-free, dependent-free, and spouse-free. LOL.

Are their any benefits to going ahead and getting LTC insurance coverage and/or life insurance now? Is it cheaper to get it now rather than wait until I am older?

I'd appreciate any insight from you all.

Thank you,
Meghan

 

[MichaelB]

Hi Meghan. You don't need life insurance if no one depends on you for their financial support. There is no advantage to getting it now vs waiting. LTC insurance at your age would also seem unnecessary. If you are concerned about LT care later in life you are young enough to start saving for it now and self-insure.

 

[REWahoo]

LTC insurance - no. Revisit the subject in 25 years or so.
Life insurance - unless someone is depending on your income, no. Revisit if that changes.

One type of insurance you should consider is disability coverage.

 

[thatgirlmjl]

Thank you both for clearing that up. I thought I could get ahead of the game by getting coverage now.

 

[thatgirlmjl]

I will look into disability coverage. That sounds much more sensible right now.

 

[MichaelB]

The disability coverage is a very good idea.

 

[FinanceDude]

What benefits are available to you at work?

 

[Alan]

The disability coverage is a very good idea.

What benefits are available to you at work?

+1

When I was working, disability insurance through work was very inexpensive and well worth having.

 

[thatgirlmjl]

I work overseas. We are only offered health insurance benefits. Nothing else. No 401ks. No life insurance. No disability insurance. Nothing but health insurance premium paid by employer.

 

[FinanceDude]

I work overseas. We are only offered health insurance benefits. Nothing else. No 401ks. No life insurance. No disability insurance. Nothing but health insurance premium paid by employer.

Get a private disability policy. Since you are young and probably in good health it should not be oppressive in cost. Figure out what you would need to get to pay your monthly expenses if something would happen. If you do get long-term disability, you can save money by pushing out the time until you need to tap it. Do you have a decent emergency fund in place?

 

[thatgirlmjl]

FinanceDude: Yes, I have an emergency fund in place that can cover my expenses for 3-6 months if need be.

I am looking into individual long-term disability insurance. I want to make sure the coverage I choose offers: about 60-70 percent of my income,“owner’s occupation," guaranteed renewable, coverage until age of 65, 120 day elimination period, and possibly is COLA.

Does this sound reasonable?

 

[Financial_independence]

Hi, I would just like to give you some insight on the life insurance question. I myself am a licensed insurance agent age 31 and have been paying my life insurance premium since I graduated college at the age of 21. What I find in this business is that people wait until later in life to buy insurance when they "have responsibilities" such as a spouse, family, mortgage, etc and do not realize premiums are based on age and health. The best time to purchase a plan is when you are young and healthy, not when your older. Now a days educated working women are more focused on their careers and are getting married and starting families later in life! Who knows what your health will be like at that time? Nothing is guaranteed in life... My first policy was enough to assist my parents (I was not married) in the funeral arrangements, pay off my debts, and leave my parents with something just to thank them for everything they've done for me while I was growing up and in college. You don't have to have a family to think about the future. I think you should look into something now, the younger and healthier you are, the lower the premiums; the older you are other things come into play when a company is accepting the liability for a life insurance policy. Hopefully this helps you! Good luck!

 

[MooreBonds]

I'm 26 years old and healthy. I am debt-free, dependent-free, and spouse-free. LOL.

Are their any benefits to going ahead and getting LTC insurance coverage and/or life insurance now? Is it cheaper to get it now rather than wait until I am older?

Well, back around when I was your age (not too long ago! ), I actually wound up buying a life insurance product from a fraternal benefit society that I also bought a small annuity in (wanted to diversify my investments). To make a long story short, the 'agent' was just some rank and file member who didn't know squat about the policy, and who told me one thing yet said another...and I discovered that the policy wasn't quite as guaranteed as she initially claimed it was (let it lapse after 1 year).

I also looked at LTC policies. Probably should have bought one, since the industry was still very young, and I could have bought a guaranteed paid-for-life policy for (what today would be) peanuts. But I didn't know if it would be worth it in the long haul.

Your decision to look at disability policies is pretty good. Just be aware that your location you live in can be just as much of a factor as your age and health! How much longer are you looking to be out of the US? I don't know if your current location would be a plus or a negative. In this situation, it could be worth it to contact an agent who has some experience with different companies, and knows what they look for as factors.

Just remember to look at different variables for any policy (life/LTC/disability) that you shop for. With a decent emergency fund, if you switch to a longer waiting period (6 months, perhaps 12 months?) the premium difference might be substantial. Compared to LTC and Life, a disability policy will be much more expensive, since the insurance company will be more likely to pay out on a disability policy than LTC or life in your situation.

In LTC, it's cheaper when you're married, and cheaper when you're younger. The biggest thing about those policies is that very few have true "guaranteed" rates. They must file with the state's insurance commissioner, and must raise everyone in the policy (not just you), but many people have received 25%/50%/more periodic rate hikes over the years due to more people collecting, and the insurers under-pricing the policies in the early years due to lack of mis-pricing the product. A quoted premium that might make sense today could result in an unfavorable analysis 10 years from now when they hike your premiums 50%, and then another 25% hike 5 years later.

 

[easysurfer]

On LTC policies, I have one with John Hancock. Every year I wrestle with the thought is it worth having because of the premium. There are lot of variables involved, valid arguements on both side whether to have one or not.

 

[Koolau]

I am not an insurance guy nor do I have a lot of knowledge about insurance - especially specific companies. With that in mind...

Our experience with LTC has not been particularly good. According to the LTC companies, they did not know how to price these policies in the beginning. This has led most LTC companies (ours included) to raise their premiums over the years. Whether they now have it "right" or not, is problematic. The suggestion to "self insure" is always "good" if you can do it. It DOES require discipline to do so however. It's not terribly difficult (doesn't require too much discipline) to pay yearly premiums, but it can be difficult to invest with the purpose of self insuring for anything. What if you eventually get the urge to buy a bigger house at some point and use your "LTC investment" to purchase said house? Now, you have no LTC insurance and no self-insurance. No recommendation either way, just saying...

Regarding disability insurance: I agree that you need some. Just understand that there are some relatively strict rules that govern how much you can collect. I believe you can purchase a dozen policies, but when it comes time to collect, you can't come out "better" than if you were working (someone please correct me or flesh this out where I'm in error). The point is that no one wants you to buy a bunch of insurance so that you can "become" disabled and "win" this bet with the insurance companies. Makes sense if you think about it. Sort of like unemployment insurance "may" tend to retard the process of looking for a new job - or so some folks would say.

Regarding life insurance: Probably the standard recommendation to "buy term and invest the difference" is what you would hear on this forum for the most part. Probably wise, but again depends upon discipline. My personal opinion (not recommendation) is to purchase some amount of whole life or "permanent" insurance or at least universal (or one of the other fancy names for an investment within the policy). I didn't buy a lot (I have about $90K face). If you buy insurance of this kind when you are young, (female), and in excellent health, your insurance "costs" will be very low. If you do buy life insurance, you should find a "good" company (you'll need to determine this with "ratings" or other means). Shop for price (per unit of insurance "cost"). Consider buying through the net and be certain that you are getting a discount for not paying a salesman's commission (they typically get the first 3 years premiums as their "cut" IIRC.) Once you have this "base" level of insurance, as long as you pay the premiums, your health situation makes no difference in the premiums. At that point, you can buy some term or whatever else you need for specific needs (kids education, funding a buy/sell agreement, paying off your house, etc. etc.)

Some policies give you lots of flexibility though they will never make you rich with their investments. You can borrow from them and you can annuitize at some point in most cases. In my opinion, the trick is to get low costs and don't let anyone load up the policy with bells and whistles.

Again, few here would agree with me and that's okay. I just think it wise to have some minimum level of coverage with the best cost you can find (assuming a good company that will stay in business).

Again, not a recommendation. Just something to consider and RESEARCH thoroughly. Remember YMMV.

 

[ronocnikral]

i bought policies last year via Term4Sale - Instant Term Life Insurance Comparisons (found link off of Boglehead's forum and wiki). i found it to be a great help.

I believe Koolau is correct about disability. Here in the states, if you pay premiums post tax, I believe in the unfortunate circumstance that you have to draw a benefit, it is not subject to FIT. So there is one "help." I took my policy out with Guardian, and they were very particular to verify income and benefits with current employer.