Financial Freedom

Dave Ramsey Has Long-Term Care Insurance Planning Wrong


I am a big fan of the various pundits who ladle out practical financial advice. And, having listened to many of them for well over 50 years, some of their advice is well-placed. But not all of it is accurate.

So, Dave Ramsey advised his millions of followers that long-term care insurance planning should begin at age 65, he is doing a significant injustice to a large percentage of innocent followers.

The 15-second “start at 65” soundbite sounds good. And, indeed one could say it make sense to start planning at what typically marks the beginning of retirement. After all, the cost of needing long-term care is the most significant risk to a secure retirement that people face.

But Ramsey is overlooking a most serious fact about long-term care insurance. Individuals must health qualify when applying for this protection. Or, more simply stated, insurers are selective in who they accept as clients. Applicants who have health issues are more likely to ultimately file claims. If insurers did not screen applicants, but rather accepted all comers, healthy applicants would bear the cost of the added overall risk.

So, when an individual applies for coverage, they will need to answer health and medical questions. Records from doctors may be requested.

This is the important fact that Dave Ramsey overlooks when advising people to start planning at age 65. According to independent research of over 155,000 applicants for individual long-term care insurance in 2009, some 23.0 percent (almost one in four) of those who actually applied for long-term care insurance were declined coverage for health reasons.

Only 14.0 percent of applicants between ages 50 to 59 were declined and less than one in 10 (9.5%) below age 50 were declined.

Keep in mind, these numbers reflect individuals who took the time to meet with an insurance professional, complete and submit an application for insurance protection. Insurance agents who know clients will definitely be declined won’t waste their time or the prospects.

So, I am very sorry Dave Ramsey has it wrong. The time to start planning for long-term care is when you have the most options. If one views long-term care insurance as one of those options, then the best time to apply is in one’s 50s. That is when you are still likely to health qualify.

Two final points for Ramsey to consider. Once one health qualifies for long-term care insurance, you can not be dropped by the insurer if and when your health changes. Secondly, insurers offer discounts to those applicants who are in better health. Some 46.0 percent of applicants between ages 50-to-59 qualified for this discount. For ages 60-to-69 the percentage was only 38.0 percent.

Facts every Dave Ramsey follower needs to know.


Source by Jesse Slome

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