Who Buys Ltc Insurance?

Long-term care insurance (LTC) is a tricky business. It's not an exact science, but most people buy it in their mid-50s to mid-60s. This is because, while you might be paying for it for a few decades, you lock in good health and today there are policies that allow you to buy some coverage now and add to it over the years. The younger you are, the more likely you are to qualify and the cheaper your payments will be. However, you also don't want to buy too soon and pay for an unnecessary length of time.

If you buy too late, you could be faced with high premiums or even be denied coverage altogether. It's a tricky balance, but financial advisors suggest that the optimal age to shop for a policy is between 60 and 65.

LTC insurance is best purchased in your mid-50s

While there is no exact science to determining the best time to purchase LTC insurance, most people in the industry agree that buying in your mid-50s is ideal. This is because, as you age, your health tends to deteriorate, and once you reach your 50s, it almost never gets better, even with diet and exercise. By purchasing LTC insurance in your mid-50s, you can lock in your good health and take advantage of discounted rates offered by insurers to applicants in good health. These discounts are locked in, so even if your health changes, you will continue to benefit from the lower rates.

Furthermore, premiums for LTC insurance are based on your age when you apply and increase with each birthday. Annual rate increases are generally 2-4% in your 50s but can jump to 6-8% per year in your 60s. Therefore, buying LTC insurance in your mid-50s can result in significant savings compared to waiting until your 60s. For example, a 55-year-old individual might pay around $1,000 per year for a standard plan, while a 65-year-old could pay more than twice that amount for the same coverage.

In addition to the financial benefits of purchasing LTC insurance in your mid-50s, there is also the peace of mind that comes with having coverage in place. While most claims are not filed until a person is in their 70s or 80s, unexpected accidents or illnesses can occur at any time. By purchasing LTC insurance in your mid-50s, you ensure that you are protected financially if you need long-term care, either expectedly or unexpectedly.

When considering LTC insurance, it is essential to evaluate your age, health, and wealth. Landmark birthdays, such as your 50th or 55th, are ideal times to investigate LTC insurance. While you don't want to purchase too young and pay for an unnecessary length of time, waiting too long may result in higher premiums or denial of coverage due to health issues. Therefore, your mid-50s is often the sweet spot for purchasing LTC insurance, balancing affordability, health, and peace of mind.

Premiums are based on age and health

When to Buy Long-Term Care Insurance

The cost of long-term care insurance premiums is based on your age and health when you apply. The younger and healthier you are, the cheaper your payments will be. Insurers offer discounts to applicants in good health, and these discounts are locked in even if your health changes. Therefore, it is recommended that people buy long-term care insurance in their mid-50s.

Age

The cost of long-term care insurance premiums increases with age. Annual rate increases are generally 2-4% in your 50s but start to be 6 to 8% per year in your 60s. For this reason, it is recommended that people buy long-term care insurance in their mid-50s.

Health

In addition to age, health is a key factor in determining long-term care insurance premiums. Insurers offer discounts to applicants in good health, and these discounts are locked in even if your health changes. Therefore, it is important to buy long-term care insurance before your health deteriorates, which is more likely to occur as you age. Again, this is why it is recommended that people buy long-term care insurance in their mid-50s.

Other Factors

Other factors that affect the cost of long-term care insurance premiums include gender and marital status. Women generally pay more than men because they live longer and are more likely to make claims. Premiums are lower for married people than for single people. The amount of coverage also affects the cost, with richer coverage resulting in higher premiums.

You may be denied coverage if you wait too long

Long-term care insurance is an option worth considering for many adults as they age. However, timing is critical. While it may not make sense to purchase a policy too early, as this could result in paying premiums needlessly for years, waiting too long to buy long-term care insurance can have serious consequences.

Higher Premiums

The longer you wait to purchase long-term care insurance, the higher your initial premium is likely to be. This is because premiums correspond to age, with annual premiums typically increasing by 2% to 4% in your 50s and 6% to 8% in your 60s. For example, a 55-year-old man might pay an estimated $2,075 a year for a long-term care policy, while a 65-year-old man's premium would jump to $3,135 a year—a 51% increase.

Ineligibility for Coverage

In addition to higher premiums, waiting too long to purchase long-term care insurance could result in ineligibility for coverage. This is because, as people age, their health typically declines, and insurance companies may reject applicants due to health issues. According to the American Association for Long-Term Care Insurance (AALTCI), about 20% of applicants in their 50s are turned down for coverage, while this number increases to 30% for applicants in their early 60s. By the time people need help with activities of daily living or develop conditions such as Alzheimer's or Parkinson's disease, they may find themselves unable to qualify for long-term care insurance.

Uninsured Risk

Another risk of waiting too long to purchase long-term care insurance is that you may be left uninsured if an unexpected accident or illness occurs. While most people may not need long-term care until their 70s or 80s, some do require it earlier in life. Without insurance, the cost of long-term care can be significant, with the average cost of a semi-private room in a nursing home in the US exceeding $94,000 per year.

In summary, while it is important to consider the timing of purchasing long-term care insurance carefully, waiting too long can result in higher premiums, ineligibility for coverage, or being left uninsured in the event of an unexpected accident or illness. For most people, buying long-term care insurance in their mid-50s is recommended, even though most claims are not filed until later in life.

LTC insurance is not necessary for the wealthy or those on Medicaid

Long-term care insurance (LTC) is not necessary for everyone. In fact, for those at the extremes of income, it may not make sense. This includes those who are wealthy enough to fund their own care and those who qualify for Medicaid.

For the wealthy, the cost of LTC insurance premiums may be prohibitive, especially when compared to the potential benefits. Wealthy individuals may be better served by investing their money and using those investments to cover any future long-term care costs. Additionally, the cost of LTC insurance may be unnecessary for those who are confident in their ability to self-fund their care, either through their savings or by relying on their family.

However, it is important to consider the potential risks of self-funding. Long-term care can be extremely expensive, with some people spending up to $20,000 per month. Additionally, the cost of care can be difficult to estimate and may increase over time due to inflation. There are also tax implications to consider, as withdrawals for paying for care may be subject to taxes.

For those who qualify for Medicaid, LTC insurance may also be unnecessary. Medicaid is a state-run program that offers low-cost or free custodial and medical services to individuals and families with limited incomes. To qualify for Medicaid, individuals must meet financial requirements based on income and non-financial requirements. While Medicaid does not offer the same flexibility and options as LTC insurance, it can provide comprehensive coverage for long-term care costs.

However, it is important to note that Medicaid rules vary by state, and not all nursing homes accept Medicaid patients. Additionally, Medicaid may not cover all the same benefits as LTC insurance, such as in-home care or adult day care.

Pre-existing conditions may affect your coverage and its cost

The impact of pre-existing conditions on your coverage and costs will depend on the specific insurer's requirements and policies. Some insurers may be more lenient and accept applicants with certain pre-existing conditions, while others may have stricter criteria. It is important to note that each insurer establishes its own health requirements, so it is advisable to speak with a long-term care insurance professional to understand your options and obtain quotes.

The likelihood of being accepted for long-term care insurance decreases with age, especially if your health deteriorates. Therefore, if you have pre-existing conditions, it may be beneficial to apply for coverage at a younger age when you are more likely to be accepted. However, it is still possible to obtain long-term care insurance at an older age, even with pre-existing conditions, if you are in relatively good health and only take common prescriptions.

Additionally, pre-existing conditions can affect the cost of your long-term care insurance. Insurers offer discounts to applicants who are in good health, and these discounts are locked in even if your health changes later on. If you have pre-existing conditions, you may still qualify for coverage, but you may be "rated", which means you will pay a higher premium. The percentage of applicants who qualify for good health discounts decreases with age, while the percentage of applicants who are declined for health reasons increases.

In summary, pre-existing conditions can impact your ability to obtain long-term care insurance and may result in higher costs. It is important to carefully consider your options and seek professional advice to ensure you are making the right decisions regarding your coverage and costs.

Frequently asked questions