For many adults as they age, long-term care insurance is an option worth considering. It may not make sense for those at the extremes of income, who are either wealthy enough to fund their own care or who qualify for Medicaid. But for those in the middle, these policies may be useful.
If you conclude that long-term care insurance makes sense for you, though, timing is critical. Those who sign up too late could find themselves weighed down by higher premiums, or worse, find themselves ineligible to receive a policy. Signing on too early, on the other hand, could leave you paying many years of premiums before you are likely to need care.
Key Takeaways
- If you think you're going to need long-term care insurance, it's better to buy it in advance, versus waiting until you actually need it.
- Buy long-term care insurance too late can result in high premiums, or you may be denied coverage altogether.
- If you buy a long-term care insurance policy too soon, you may be paying needlessly for years.
- For most people, buying in their mid-50s makes the most sense, even though most claims aren't filed until a person is in their 70s or 80s.
The Best Age To Buy
Too often, those who seek long-term health care only think about the cost of such services once they need them. That usually results in serious sticker shock. According to Genworth Financial Inc. (GNW), which sells long-term care insurance, the average cost of a semi-private room at a nursing home in the U.S. for 2021, the latest data available, was more than $94,000 a year.
The American Association for Long-Term Care Insurance (AALTCI) says that the largest cohort of individuals taking out an LTC policy do so between the ages of 55 and 64. That may seem early, considering the vast majority of claims occur when people are in their 70s or 80s. The organization says, however, that those who hold out may not qualify if their health diminishes.
While the Affordable Care Act prohibits traditional health insurers from excluding consumers based on pre-existing medical conditions, it doesn't cover long-term care policies. By the time people need help with activities such as bathing or dressing or have conditions such as Alzheimer’s disease and Parkinson’s disease, they could be stuck with higher premiums or have their application rejected. According to the AALTCI, roughly 30% of applicants in their early 60s are declined coverage, whereas about 20% of those in their 50s are turned down.
Long-term care insurance is a necessity of the middle class, not the wealthy, who often can afford private care, or those with lower incomes, who qualify for Medicaid.
Rates Only Get Higher
Another reason to be proactive about long-term care insurance is that premiums correspond to age. Every time people in their 50s reach a new birthday, the annual premiums they would be charged typically go up 2% to 4%. Once they reach their 60s, premiums jump 6% to 8% for each year of age.
To get the same amount of coverage, someone who waits until age 65 to buy a policy could be charged premiums that are more than twice as high as those paid by an individual who bought their plan at 55.If the consumer is like most Americans, they won’t file a claim until at least age 80. Even with 10 extra years of premiums, buying insurance at 55 could save significant money in the long run.
Note
The longer you wait to get long-term care insurance, the more expensive it is, with premiums corresponding to age.
Consider Inflation Protection
If you do buy in your mid-50s, the odds are you’ll be paying in for more than two decades before filing a claim. Butbecause of inflation, the amount of coverage you buy won’t be worth nearly as much as it is today.
Consider an individual who buys a $150,000 policy and doesn’t need it for 20 years. If long-term care costs rise 3% a year on average, the insurance provides the equivalent of just $83,051 in protection.
Fortunately, many policies today come with inflation protection. The amount of benefits grows at either a fixed amount each year, or compounds by a certain percentage annually. Naturally, you’ll pay significantly more in premiums to get this added benefit. But if you’re concerned about a minimal level of protection when you reach an advanced age, that could be a sacrifice worth making.
What Is Long-Term Care Insurance?
Long-term care (LTC) insurance is coverage that provides nursing-home care, home-health care, and personal or adult day care for people age 65 or older or with a chronic or disabling condition that needs constant supervision. It is meant to help people live as independently and safely as possible when they can no longer do so on their own. This coverage can help provide additional funds to help pay for supplementary supports and services. LTC insurance offers more flexibility and options than many public assistance programs, such asMedicaid.
Is There an Upper Age Limit To Buy Long-Term Care Insurance?
Technically, there is no age limit to buy long-term care (LTC). It's sometimes possible to get this insurance even after age 75, if you are in relatively good health, only take prescriptions for common conditions like blood pressure and cholesterol, meet the height-to-weight standards, etc. It's not very likely an applicant over 85, one who already needs assistance with daily activities, or is receiving Social Security would be granted LTC insurance.
How Much Does Long-Term Care Insurance Cost?
The cost of long-term care insurance varies by age, health, coverage amount, gender, and other factors. But in 2022, 55-year-olds paid about $950 (men) to $1,500 (women) a year on average nationwide for $165,000 in level benefits, according to the American Association for Long-Term Care Insurance.
The Bottom Line
If you decide that long-term care insurance is the best way to prepare for your later-in-life care needs, there are advantages to buying it before you hit your 60s. You’ll not only increase your chance of getting approvedbut also benefit from a lower rate, in most cases. Keep in mind that pre-existing conditions may also affect your ability to gain coverage, as well as the policy's cost.
