At what age should you get a long-term care policy? An expert's guide

According to the American Association for Long-Term Care Insurance, the optimal time to get a long-term care policy is in your mid-50s to early 60s, a period often referred to as the “sweet spot”. This guide explores why that age range is so important and details the factors you should consider when making your decision.

Quick Summary

The ideal time to secure a long-term care insurance policy is typically in your mid-50s, when you can benefit from lower premiums and better health qualification odds. Waiting too long can lead to higher costs or potential denial due to developing health issues.

Key Points

• Optimal Age: The 'sweet spot' for purchasing long-term care insurance is generally in your mid-50s to early 60s.

• Affordability: Buying earlier locks in lower premiums, as costs increase significantly with age.

• Health is Key: Your ability to qualify is easier when you are younger and healthier; denial rates rise substantially after age 60.

• Protecting Assets: An LTC policy can protect your savings and retirement funds from being depleted by high care costs.

• Avoid Burdening Family: Coverage provides access to professional care, reducing the potential financial and emotional burden on loved ones.

• Alternatives Exist: Hybrid policies that combine LTC with life insurance or annuities offer different benefits and cost structures.

Why Your Mid-50s to Mid-60s is the "Sweet Spot"

Financial experts and insurance professionals generally agree that purchasing a long-term care (LTC) policy during your 50s or early 60s is the most strategic time. The reasons are directly tied to the two most critical factors in determining your premium: your age and your health. When you're younger, you are more likely to be in good health, and the insurance company will reward this with a lower premium. The older you get, the higher your premiums become, and the more likely you are to have a health issue that could lead to a premium increase or a denial of coverage.

Benefits of Buying Earlier

1. Lower, More Stable Premiums: Insurance premiums are largely based on risk. The younger and healthier you are, the less risk you pose to the insurer. Purchasing a policy in your 50s locks in a much lower premium compared to buying in your 60s or 70s. For example, the cost for a 65-year-old could be significantly higher than for a 55-year-old for the same coverage.
2. Higher Chance of Qualification: Underwriting becomes more stringent as you age. Data shows that the percentage of applicants who are denied coverage due to health reasons rises dramatically with age. A person in their 50s has a much higher likelihood of qualifying for a policy at favorable health rates than someone in their 60s or 70s.
3. Inflation Protection: By purchasing a policy earlier, you have more time to add inflation protection to your plan. This crucial feature ensures your benefits keep pace with the rising costs of care over the decades until you need to use them, preventing your coverage from being devalued by inflation.

The Risks of Delaying Your Purchase

Waiting too long to buy a long-term care policy can be a costly mistake. For every year you wait past the optimal window, premiums increase, sometimes exponentially. By the time you reach your 70s, not only are premiums prohibitively expensive, but your chances of being denied coverage outright become much higher due to medical issues common with age. Furthermore, delaying your purchase leaves you uninsured during the interim, meaning a sudden illness or accident could leave you responsible for all care costs out-of-pocket.

Factors Beyond Age to Consider

Age is just one piece of the puzzle. A comprehensive approach to determining the right time for you involves a thorough assessment of your personal and financial situation.

Your Overall Health

Your current and family health history are major determinants. If there is a history of chronic illnesses or cognitive impairments like Alzheimer's in your family, you may be at higher risk of needing care yourself. In this case, purchasing a policy earlier, while still in good health, can provide peace of mind and more affordable options.

Financial Situation and Asset Protection

Consider your net worth and retirement savings. Are you in a position to self-fund potential long-term care expenses, which can be significant? The cost of a nursing home can exceed $100,000 annually in some areas. A long-term care policy is designed to protect your assets from being depleted by these costs. However, if your assets are limited, you may eventually qualify for Medicaid, which covers long-term care but with strict eligibility requirements and limitations on care options.

Family Structure and Caregiving Options

Think about your family dynamic. Do you have a spouse or adult children who could potentially act as caregivers? While family caregiving is an option, it places a heavy emotional and financial burden on loved ones. A long-term care policy ensures you have professional care options, regardless of your family's capacity to provide it.

Long-Term Care Insurance vs. Self-Funding

When planning for future care costs, the primary decision is between buying insurance or self-funding. Here is a comparison to help weigh the options:

Feature	Long-Term Care Insurance	Self-Funding (Savings/Investments)
Protection	Transfers the financial risk of high care costs to an insurance company.	You bear the financial risk entirely; a lengthy illness could deplete your savings.
Premiums	Fixed annual or monthly premiums (though traditional policy rates can increase).	No premiums, but requires significant and disciplined savings.
Control	Policy dictates coverage amount, type of care, and benefit period.	Retain full control over how and when your money is spent.
Inheritance	If you don't use the benefits, premiums are paid without a return (for traditional policies). Hybrid policies can offer a death benefit.	Any remaining funds can be left to heirs or for other purposes.
Cost Predictability	Premium is known (though subject to potential increases with traditional policies), providing budget predictability.	The cost of care is unpredictable, making financial planning more volatile.
Asset Protection	Protects your retirement and other assets from being exhausted by care costs.	Risks significant depletion of assets, impacting retirement lifestyle and legacy.

Exploring Alternatives and Hybrid Policies

For those who find traditional LTC insurance unappealing or too expensive, there are alternatives to consider. Hybrid policies, for instance, combine life insurance or an annuity with a long-term care rider. If you end up not needing long-term care, there is still a payout, such as a death benefit, so your investment isn't lost. Other alternatives include leveraging a Health Savings Account (HSA) or planning to rely on home equity, though these also have their own set of limitations and risks.

Conclusion

Deciding at what age should you get a long-term care policy is a pivotal part of responsible financial planning. The mid-50s to mid-60s window offers the best balance of affordability, eligibility, and strategic planning. While the thought of future care can be uncomfortable, procrastinating can lead to far greater financial strain and fewer options down the road. By assessing your health, finances, and family situation, you can determine if this is the right time to secure your long-term financial independence. Consulting a trusted financial advisor can help clarify which path best fits your individual needs and goals.

Find valuable consumer resources on long-term care insurance at the National Association of Insurance Commissioners website.

Frequently Asked Questions

Why are long-term care insurance premiums higher for older applicants?

Premiums are based on risk. As you get older, the likelihood of developing health conditions that require long-term care increases, so insurance companies charge more to offset that higher risk.

Can I get long-term care insurance if I have a pre-existing condition?

Some companies may sell you a policy with a pre-existing condition, but it could come with a waiting period before that specific condition is covered, typically around six months. However, a pre-existing condition could also lead to higher premiums or a denial of coverage.

What is a hybrid long-term care insurance policy?

A hybrid policy combines long-term care benefits with another financial product, such as life insurance or an annuity. This can be appealing because if you don't use the long-term care benefits, a death benefit is still paid out.

What happens if I never need long-term care?

With a traditional long-term care policy, if you never need care, you and your heirs won't receive a payout, and the money paid in premiums is not returned. Hybrid policies are designed to avoid this, providing a death benefit if the LTC benefit isn't used.

Will Medicare or private health insurance pay for long-term care?

No, Medicare and typical health insurance policies do not cover long-term custodial care. Medicare only covers limited stays in skilled nursing facilities under specific circumstances.

Is self-funding a viable alternative to buying a long-term care policy?

Self-funding is an option for those with substantial assets, as it avoids premium payments and retains control of your funds. However, it carries the risk of depleting your savings quickly if extended care is needed, and care costs are unpredictable.

How do I choose the right long-term care policy for me?

Compare policies from several companies, paying attention to benefits, facility types covered, coverage limits, and premium costs. Consider your health, finances, and future care needs, and don't hesitate to consult a financial advisor.