When to Buy Long-Term Care Insurance

If you were ever to become disabled or suffer a chronic illness or age-related debility that requires you to pay for help feeding and dressing yourself or similar assistance for an extended period, long-term care insurance could be a valuable thing to have. This insurance pays for services regular health insurance doesn’t cover, including assistance with activities of daily living at home or in an assisted living center or nursing home. Timing is an important consideration when it comes to buying long-term care insurance. If you’re thinking about long-term care insurance, consider talking it over with a financial advisor.

Long-Term Care Insurance Basics

Long-term care insurance can help you pay the costs of receiving extended care in nursing homes and assisted living facilities, as well as in-home assistance with activities of daily living such as bathing and getting dressed. These are costs that health insurance, including Medicare, typically does not cover. Another government health plan, Medicaid, can pay for these services. However, only people with limited financial means can generally qualify for Medicaid.

Long-term care insurance works similarly to other types of insurance. That is, in exchange for paying a premium, usually monthly, the policy will pay providers for the care they deliver or, alternatively, reimburse you for your out-of-pocket costs. However, long-term care insurance has special features that distinguish it from some other types of insurance.

For instance, unlike auto insurance, which is mandatory in most states, long-term care insurance is entirely voluntary and most people do not purchase it. Also, it’s less likely to be provided as a benefit by employers than health and life insurance coverage. Finally, timing is a bigger factor with long-term care insurance. When you buy it is a major consideration. Here’s how to factor timing into the decision.

Do You Need Long-Term Care Insurance?

The cost of long-term care can be daunting. According to LongTermCare.gov, the price of a semi-private room in a nursing home averages $6,844 per month or $82,128 per year. However, that doesn’t mean everybody needs long-term care.

People who have significant assets that they want to protect from having to expend for long-term care are more likely to benefit from long-term care insurance than someone who has a small net worth. Also, good candidates for long-term care insurance generally will have a good income so they can pay the premiums. Gender can also be a factor since women who need long-term care typically need it longer than men.

When to Buy Long-Term Care Insurance

Buying long-term care insurance isn’t cut and dry for everyone and there are a number of things that you need to consider. Chief among these considerations might be the timing of when you buy. If you think you want to buy long-term care insurance, here are considerations on timing:

Coverage is permanent: Once you acquire a policy, you are covered for life as long as you keep paying the premiums. Your coverage can’t be canceled except for non-payment or if you voluntarily relinquish the policy.
Premiums are expensive: The average premium for a 55-year-old man with $165,000 in immediate coverage in 2022 was $2,220 per year, according to the American Association for Long-Term Care Insurance (AALTCI).
Premiums are likely to go up: While your insurer can’t hike your personal premium because you get older or have a claim, it is not uncommon for premiums for groups of policyholders to go up periodically and, sometimes, steeply.
Health matters: If you are in less than good health when you apply, your initial premium will be higher than if you buy a policy when you are healthy. For that reason, it’s often better to buy long-term care insurance before your health starts to fail.
Age matters: If you are older when you buy long-term care, even if still healthy, you’ll pay more than if you bought at a younger age.
You have to qualify to even get coverage: If you are seriously ill or already need long-term care when you move to buy a policy, you may be rejected. Again, the time to buy it is before you need it.

These considerations combine to complicate the decision of when to buy long-term care coverage. For instance, if you buy insurance at a younger age, many years before you are likely to need it, you’ll be paying expensive premiums for many years. And it’s a good idea to keep in mind the fact that, according to the AALTCI, only about half of people who buy long-term care insurance ever use it. The rest have paid their premiums for no tangible financial benefit.

Add it up and the most common time when people buy long-term care insurance is between ages 55 and 65. In many buyers’ estimation, this is the sweet spot between having to pay higher premiums if they wait to purchase and having to pay lower premiums for a longer time if they purchase sooner.

The Bottom Line

Timing is an important consideration when deciding whether or not to buy long-term care insurance. Most purchasers acquire coverage when they are aged 55-65. Waiting longer risks having to pay higher premiums because of advancing age or declining health. Buying sooner means having to pay premiums for a longer period of time before the coverage is likely to be of value. Individual circumstances, such as family health history, personal assets and income also may be important factors in deciding when or even whether to buy long-term care insurance.

Tips for Buying Insurance

A financial advisor can help you decide how and whether long-term care insurance fits into your overall financial plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you are considering buying life insurance, you are probably wondering how much coverage to get. SmartAsset’s life insurance calculator can give you an answer based on your location, age, income and other factors.