The cost of long-term medical care is high and going higher, leading many consumers to wonder when is the "perfect" time to buy long-term care insurance.
According to a recent study on long-term care insurance prices by Genworth, the cost of even one year of basic long-term care services is exploding.
Here’s a quick snapshot of annual prices:
|Home health care services||$44,616|
|Adult day health care||$17,904|
|Assisted living facility||$43,200|
|Nursing home care||$91,250|
The upshot for Americans, especially ones either in middle age or already in retirement, is that buying long-term care insurance is no luxury – it’s a necessity.
Virtually all industry experts contacted by InsuranceQuotes.com agree on that point, but where they differ is exactly when (i.e., at what age) should you buy long-term care insurance.
Finding the sweet spot to buy long-term care insurance
“The best age to purchase a LTC policy is between 45-to-50 years of age,” says Levar Haffoney, principal at Fayohne Advisors in New York City. “This allows you to lock in the rate. As you get older, premiums for long-term care insurance only increase. It’s also easier to qualify because you are less of a risk at that age.”
Others say insurance consumers shouldn’t even wait until age 50 to buy long-term care coverage.
Long-term care insurance should be purchased by someone in their 40s, says Christina Durta, a certified life insurance specialist in Panama City, Fla. “Specifically, they should look for an approved partnership plan in their state to protect their assets in the future.”
Partnership plans generally allow individuals to retain their assets and still receive benefits under Medicaid, Durta explains. “The protection is normally dollar for dollar up to the amount of long-term care insurance,” she says. “The younger you are, the lower your rates will be and the better your chance of being approved. Far too many people wait until their later years to buy the insurance when they have developed pre-existing conditions and then get declined for coverage. There are many chronic illnesses which are an automatic 'thanks, but don't even bother sending in an application' if you have this condition.”
'No one has a crystal ball'
Technically, any age is a good age to buy long-term care insurance – but, as Durta says, the longer you wait, the more you’ll pay.
“The best way to reap the maximum benefits is to buy long-term care insurance in the year before you suffer a serious accident, or your doctor diagnoses you with a dread disease,” says Kevin Haney, owner of A.S.K. Benefit Solutions, in New York City.
“This way you minimize the amount of total premiums you must pay. You can lock in lower monthly premiums by purchasing earlier, but if you pay slightly lower premiums 10 times as long (if you buy long-term care insurance really early), you’re really not saving money.”
There is one major drawback to this approach, Haney adds. “No one has a crystal ball,” he says. And nobody knows when the accident may occur, or when the doctor may present the diagnosis. If you wait too long to apply, you may not be healthy enough to qualify. All carriers perform rigorous medical underwriting, so waiting has its risks, too.”
The timing depends on you
All in all, the best age to buy a long-term care insurance policy is up in the air.
If you’re thinking about buying a policy, the perfect age is your current one,” Haney says. “So buy now while you are still healthy enough to qualify.”
Other industry experts agree.
“The problem with making a blanket statement of the perfect time is that everyone is in a different financial situation and many deal with medical issues that make underwriting more difficult,” notes Nathan Garcia, managing director at Westbourne Investments, and author of “The Seven New Rules For Retirement.”
So before springing for a long-term care policy, Garcia prefers that his clients save as much as possible, particularly if they are not already maxing out their 401(k) plan. “Once this is covered, and if they have the medical history to withstand underwriting, then we look at what options are available.”
So there you have it – there may or may not be no one specific “perfect time” to buy long-term care insurance. What’s more important is to discuss the issue with a trusted financial professional, study your own unique situation, and just make sure you have long-term care insurance when you need it.
An adult is anyone age 18 or older in your household.
Step 1 / 3
A child is anyone under the age of 18 in your household.
Step 2 / 3
Annual household income is the adjusted gross income your household receives during the tax year. Note: It also includes the incomes of all your dependents who are required to file tax returns.
Step 3 / 3
Your estimated tax penalty is $*
Your estimated tax penalty is $*
Your tax penalty increases by % from to .Go Back
How we calculate the penalties:X
For 2015, the penalty calculation is the greater of a) 2% of your household income that is above the tax return filing threshold for your filing status, or b) your family's flat dollar amount which is $325 per adult and $162.50 per child, limited to a family maximum of $975. The maximum penalty for an individual is $2,595. The maximum penalty for a family of five or more is $12,974.
For 2016, the penalty calculation is the greater of a) 2.5% of your household income that is above the tax return filing threshold for your filing status, or b) your family's flat dollar amount which is $695 per adult and $347.50 per child, limited to a family maximum of $2,085. The maximum penalties for individuals and families in 2016 are indexed for an estimated premium inflation rate of 6%.