Long-Term Care Insurance: When’s the Right Time To Buy?

By Brett Carolan, CFP® | Feb 14, 2024 |

Questions about when to buy long-term care insurance have evolved as insurance pricing has changed. In the 1980s, insurance companies favored men over women in pricing long-term care policies. A course correction in the mid-90s increased premiums for women (due to longer life expectancy and the higher likelihood of requiring services because of the longer life expectancy).  

What’s more, policy types changed based on changing needs. Defined policies (e.g., $200 per day with a 5% cost of living adjustment, payable over five years) potentially will not meet the needs of families with dementia-related care. Instead, they preferred to opt for lifetime policies. Insurance companies have had to pivot because of some of the claims, and to stay solvent, they have had to increase premiums significantly.  

Now, standalone long-term care policies are rare, replaced by hybrid options tying long-term care benefits to life insurance/annuities. Determining the right time to buy insurance requires assessing the choices you can purchase and the coverage you think you will need. Those two don’t always easily align. And when it does, it’s still complicated.  

Premiums are rising steeply, prompting a reassessment of the value of these policies against potential Medicaid reliance. Like other types of insurance (property and casualty insurance), long-term care insurance decisions take planning and discussions with an expert. 

But when is the right time to buy?

Look for a policy that fits with where you are in life—in terms of your health and financial situation. These include:  

  • Age and health. Long-term care insurance is typically more affordable when you purchase it as a younger person and are in good health. As you age, costs go up—as do limitations and exclusions based on pre-existing conditions.   
  • Financial stability. Long-term care can be expensive, and insurance can help cover the costs. But you still have to pay for the premiums. Consider your income, savings, and other assets to determine if you can comfortably pay for insurance without compromising your financial stability.  
  • Family history. Consider purchasing insurance earlier if you have a family history of certain medical conditions or long-term care needs. Understanding your family’s health history can provide valuable insight into your long-term care needs.   

A financial advisor or insurance professional can help guide you through the process and provide personalized advice based on your circumstances.  

Long-term care insurance options

The options can be mystifying. Thankfully, there isn’t a one-size-fits-all approach. You need to understand your options for the T-shirt size that’s right for you.  

Here are three common types of insurance:  

  • Traditional long-term care insurance. This covers services such as nursing home care, assisted living, and in-home care. You pay premiums to the insurance company; if you require care in the future, the policy will cover some of the costs.  
  • Hybrid long-term care insurance. This offers the flexibility of providing benefits and a death benefit or the option to receive a refund if it’s never needed.  
  • Self-funding or relying on government programs. Some bypass the insurance route and use their savings; others may rely on government programs such as Medicaid, which provides coverage for services for those who meet certain eligibility criteria.  

Benefits and coverage

Ultimately, the right life insurance for you depends on your coverage needs. As with all insurance, there is an element of the unknown. But actuarial tables alone can give you a good idea of what to plan for.   

Here are some key factors to consider:  

  • Types of care covered. Insurance typically covers many services, including skilled nursing care, assisted living, in-home care, and adult daycare.   
  • Coverage limits and exclusions. Policies have different limits on daily or monthly benefits, as well as a maximum benefit amount and exclusions for pre-existing conditions or certain types of care.   
  • Inflation protection. Keeping pace with the rising cost of care over time ensures your coverage remains effective.   

Costs and affordability

Understanding premiums and deductibles helps you determine affordability. Request quotes from multiple providers enable you to compare costs and coverage options.   

Premiums are the regular payments you make to the insurance company to maintain coverage. The amount you pay will depend on several factors, such as your age, health condition, and the level of coverage you choose. Typically, younger individuals with good health will have lower premiums than older individuals or those with pre-existing medical conditions.  

Deductibles, however, are the amount you must pay out of pocket before the insurance coverage kicks in. Choosing a higher deductible can help reduce your premium costs, but it’s important to consider whether you’ll be able to afford the deductible if you need to make a claim.  

Consider the potential tax benefits and deductions associated with long-term care insurance. Depending on your circumstances, you may be eligible for certain tax advantages.   

When to start considering long-term care insurance

Knowing when to start considering long-term care insurance can help protect your financial well-being and provide peace of mind.   

While there is no set age to start thinking about it, purchasing a policy when younger and healthier generally results in lower premiums. Start exploring long-term care insurance options in your 50s or early 60s.   

Making an informed decision

You don’t want to purchase long-term care insurance on your own. Meet with a financial advisor to evaluate your financial situation; compare different insurance providers to find the best fit; and pay close attention to coverage limitations, exclusions, waiting periods, and premium payment options.   

By following these steps, gathering information, and understanding the options available, you can make a confident decision when purchasing long-term care insurance. Remember, the right policy can provide financial security and peace of mind for you and your loved ones. 



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