Why your age is the biggest factor
Your age is the single most significant determinant of both the cost and availability of a long-term care (LTC) insurance policy. Insurers price their policies based on risk, and as you age, the likelihood of needing long-term care increases. This means premiums rise sharply with each passing year, particularly after you reach your mid-60s.
The sweet spot: Your mid-50s
Financial experts and insurance professionals widely regard your mid-50s as the optimal time to buy an LTC policy. Several compelling factors contribute to this recommendation:
- Lower premiums: You can lock in lower, more affordable premiums based on your younger age. The American Association for Long-Term Care Insurance has shown that annual premiums for a 65-year-old are significantly higher than for a 55-year-old.
- Better health qualification: Most people in their 50s are still in relatively good health, making it easier to pass the medical underwriting process. As you enter your 60s and 70s, the risk of being denied coverage due to pre-existing conditions rises dramatically.
- More time for planning: Purchasing a policy in your 50s gives you ample time to create a comprehensive financial strategy for your later years. This includes deciding on the coverage amount, benefit period, and exploring different policy types without pressure.
What happens if you wait?
Waiting too long to purchase an LTC policy can have serious financial consequences. While it's not impossible to get coverage in your 60s or 70s, you will face steeper premiums and a more rigorous underwriting process. By your 70s, premiums can more than double compared to the cost in your 60s. Furthermore, your risk of developing a health condition that could make you uninsurable increases each year you delay.
Factors to weigh before buying
Beyond your age, several other factors should influence your decision on when to purchase an LTC policy. Consider these points carefully as you plan for the future.
Your health status
Your health is the other primary driver of LTC insurance costs and eligibility. The phrase 'your health buys it, your money pays for it' holds true. Even if you are young, a pre-existing condition could affect your ability to qualify for coverage or lead to higher premiums. If you have a family history of conditions like Alzheimer's or other cognitive impairments, buying a policy while you are young and healthy is especially critical.
Your financial situation
Assessing your financial readiness is essential. Financial advisors often suggest considering LTC insurance if you have assets of at least $250,000, not including your home. You should also ensure you can afford the premiums both now and throughout retirement, as rate increases are possible for policies sold to entire groups of policyholders. A good rule of thumb is that premiums should not exceed 7% of your income when you buy the policy. If you have significant assets and prefer to protect them rather than self-insure, an LTC policy is a valuable tool.
Family history and support
Consider your family's health history and whether you have a strong, local family support system. While family can provide some level of care, the physical, emotional, and financial toll on caregivers can be immense. Many people purchase LTC insurance precisely to avoid burdening their loved ones. If your family history suggests a high risk of needing extended care, that is another reason to buy a policy earlier.
Comparison of policy purchase ages
| Feature | Age 40s | Age 50s | Age 60s | Age 70s+ |
|---|---|---|---|---|
| Premiums | Lowest; risk of paying longer. | Optimal balance of low cost and shorter payment period. | Significantly higher than in 50s. | Extremely high and may be unaffordable. |
| Health Underwriting | Easiest; highest chance of approval. | Strong chance of approval; good health window. | Higher chance of being denied coverage. | High risk of denial due to health issues. |
| Inflation Protection | Most effective; benefits have more time to grow. | Very effective; plenty of time for benefits to keep pace. | Still beneficial, but with higher starting costs. | May be less impactful due to higher initial premiums. |
| Flexibility | Maximum policy options and customization. | Excellent options for traditional or hybrid plans. | Limited options; focus on traditional policies. | Very limited options, if any are available. |
| Opportunity Cost | Funds could be invested elsewhere for higher returns. | Minimal opportunity cost, high value. | Higher opportunity cost for less coverage. | Significant cost relative to benefit. |
The different types of LTC policies
Your age might also influence the type of LTC policy you choose. Understanding the options is key to making an informed decision.
Traditional LTC insurance
This is a standalone policy that provides coverage for long-term care services only. Premiums are generally paid annually and are based on your age and health at the time of purchase. Younger buyers get lower rates, but these premiums are not always guaranteed and can increase for an entire class of policyholders over time.
Hybrid life insurance/LTC policies
Also known as a linked-benefit policy, this option combines life insurance with long-term care benefits. If you need LTC, you can access a portion of the death benefit to pay for care. If you don't use the benefit for care, your beneficiaries receive the death benefit upon your death. These policies often have guaranteed premiums and may include a return of premium feature. They are ideal for those who can make a substantial upfront payment, making them a good option for people in their 50s who have accumulated wealth.
Making the final decision
When it comes to deciding at what age should you buy a long-term care policy, the evidence clearly points to a midlife purchase. However, the exact timing depends on your individual circumstances. Here are some steps to guide your decision-making process:
- Assess your needs: Start by understanding the potential costs of care in your area and considering your family health history. Think about what type of care you might prefer (e.g., home care, assisted living) and how long you might need it.
- Evaluate your assets: Determine if you have enough savings to self-insure or if you would benefit from transferring the risk to an insurance company. Consider the potential impact of long-term care costs on your other financial goals, like retirement.
- Explore policy options: Research both traditional and hybrid policies, paying close attention to coverage limits, inflation protection, and elimination periods. Consider working with a financial professional who specializes in LTC insurance to navigate the choices.
- Shop around: Get quotes from several different reputable insurance companies. Compare not only the premiums but also the companies' financial strength and history of rate increases.
- Don't delay indefinitely: While timing is important, don't let analysis paralysis prevent you from taking action. Waiting too long is the biggest mistake you can make, as it could mean paying thousands more per year or being denied coverage altogether. If you are in your 50s, now is the time to seriously consider your options. For more information on LTC planning, you can explore resources like the one provided by the National Association of Insurance Commissioners.
Conclusion: The prime time is now
Deciding at what age should you buy a long-term care policy is a personal and financial decision that requires careful consideration. However, the financial and health-related advantages of purchasing a policy in your mid-50s are clear. Lower premiums, higher approval rates, and more time for proactive planning make this a strategic window of opportunity. By acting now, you can secure your financial future, protect your assets, and ensure that you have control over your care needs as you age, rather than leaving it to chance.
