Living to 100 - what will your insurance needs be?
More people than ever are living to 100, meaning it's that much more important to prepare for the future - including insurance needs.
So how likely are you to live to three digits?
Right now, about one in 6,000 people is a centenarian, up from one in 10,000 in 1994, according to the Boston University School of Medicine New England Centenarian Study. So, centenarians are one of the fastest growing segments of the population, if not the fastest, according to the project. Also, women are more likely to live that long: they make up more than 80 percent of the 100-year club.
If you too hope to blow out 100 candles on a birthday cake one day, here are some insurance considerations:
Disability insurance pays you a percentage of your salary if you become unable to work because of a disability, whether it was caused by a work-related injury or not. Common causes for disability insurance claims include injury, cancer, heart problems, mental disorders, and substance abuse, according to Northwestern Mutual insurance company. Depending on the policy, you must either be unable to perform your own job or unable to perform any job for which you are qualified, to file a claim. Experts say whether or not you will need it into your senior years depends on your retirement plans. Do you plan to retire early and relax for the second half of your life? Or will you be working to support yourself - and maybe a family - well after your coworkers have gotten their gold watches?
If you envision working well into old age, make sure you have disability insurance before age 60, says Maureen Kirschhofer, president of the International DI Society, an organization that provides education about disability insurance. Most insurance companies will not issue new individual disability insurance policies to applicants older than 60, she says. After age 65, a policyholder typically can renew the policy but must continue working full-time - usually at least 30 hours a week - in order to maintain coverage, she says.
Long-term care insurance
Long-term care insurance pays for your care if you can no longer perform daily activities, like eating, bathing or dressing on your own. There are two types of policies: one type, indemnity long-term care insurance, pays you a regular set amount that you can spend any way you choose, whether it's related to your care or not. "You can use it to put in a pool if you want," Kirschhofer says.
The other type, reimbursement long-term care insurance, recompenses you up to a set amount for the cost of your care, which could include a nursing home stay, assisted living, adult daycare, or a home health aide.
Premiums for long-term care insurance can be high, especially if you have health problems, and they can increase at any time, Kirschhofer says. For example, one of her clients pays more than $7,200 a year to insure his 65-year-old mom who is ill, and he pays about $3,700 a year to insure his healthy mother-in-law of the same age, she says.
Rates are on the rise partly because of increasing lifespans, Kirschhofer says. For younger clients who hope to live to 100, she'd recommend a limited pay policy, which is set up so you pay premiums only for a set time period - for example, for 10 years or up to age 65.
Long-term care insurance is offered either with a daily benefit or a monthly benefit, depending on the policy. Long-term care insurance typically is available with benefits ranging from $50 to $500 a day or $1,200 to $12,000 a month, according to insurance brokerage Goldenzweig Financial Group. It's better to purchase insurance with a monthly benefit because costs can vary a lot from day to day, depending on which services or treatments you have, Kirschhofer says.
For a policy with a $200-a-day benefit, paid for over 10 years, a healthy 50-year-old might pay almost $3,600 a year and almost $36,000 total. The same person would pay a lower yearly premium but a higher total amount if they instead chose to make payments until age 65. After the payment period is over, you pay nothing but keep coverage for the rest of your life. "That way, it won't matter if they raise the rates, because you're done," she says.
Seniors - and others betting on living to 100 - might want to look beyond the standard term life insurance that's often recommended to younger clients, says Jeff Rose, a certified financial planner who blogs at LifeInsurancebyJeff.com.
Term life insurance lasts for a set time, typically 10, 20 or 30 years, and pays a death benefit if you die during that period. But Rose says he is getting more clients in their 50s, 60s and 70s who want to buy life insurance, and the premiums for term life skyrocket as you age.
For example, a 30-year-old man might pay $13 a month for a $250,000, 20-year term life policy, Rose says. But a 70-year-old male in good health, if he could get a policy, could shell out $400 a month, and the policy would expire 10 years before he becomes a centenarian. If he lives to 100, he could pay $100,000 in premiums and die with no money to show for it.
A cash-value life insurance policy, such as whole life insurance or universal life insurance, might be a better choice, Rose says. Cash-value policies double as life insurance and an investment vehicle. But these types of policies can be complicated, so seniors should get expert advice. One thing to think about: when does the policy mature? Some policies pay out at age 100, meaning the policyholder gets a check for the cash value at that time and has to pay taxes, according to Katt & Company, fee-only life insurance advisors.
Seniors should think about why they're purchasing the policy, Rose says: is it to support a loved one, pay for a grandchild's college education or just to have a little money left for burial expenses? If it's mainly to cover funeral costs, purchasing a smaller policy or just saving up could be the way to go, Rose says.
You can get auto insurance to age 100 and beyond if you're licensed and can drive safely, but you might need to plan on paying higher premiums as you age, says Daniel Herzak, an agent at Insurance Systems Group, Inc., an insurance agency in Ohio.
Though auto insurance companies tend to consider elderly drivers riskier than middle-aged drivers to insure, an independent insurance agent might be able to steer you toward an insurance company that will give you a good deal, Herzak says. For example, Herzak's senior clients often end up buying insurance from one company that courts the 55-and-older set, offering them good rates on bundled auto and home insurance policies. And, according to Edmunds.com, older drivers can take a mature driver safety course, such as the one offered by AARP, and some insurers will give them a discount.In addition to making good choices about insurance, smart saving and investing are essential if you want to stay on solid financial ground up to your 100th birthday and beyond.