Long-term care is jaw-droppingly expensive. The national median cost for staying in a private room at a nursing home is $105,852 per year, according to Genworth Financial.
Receiving care in your home is cheaper, but even a home health aide will set you back almost $55,000 a year, assuming they provide care for 6.5 hours a day.
Don’t assume Medicare will pick up the tab, either. It doesn’t provide coverage for ongoing custodial care such as that typically provided by assisted living and nursing home facilities.
State Medicaid programs will pay for nursing home care but only after you’ve depleted almost all your assets first.
Buying long-term care insurance is one way to cover the cost of care, but policies can come with their own hefty price tag.
Premiums will be lower if you buy coverage when you’re younger, but you may end up paying for years on a policy before you need it. Wait too long, and you could be denied coverage.
So what’s the sweet spot for purchasing long-term care insurance? It seems to be in your 50s.
Consider long-term care insurance before age 60
Premiums for long-term care insurance climb as you age, but that’s not the main reason you want to buy early. Instead, you want to have some coverage in place in your 50s before any health issues could waylay your application.
“Something as simple as going to physical therapy could cause a denial,” says Erin Ardleigh, founder and president of Dynama Insurance, which is based in New York City but helps clients nationwide. “Waiting until 60 (to buy insurance) can be risky.”
At age 65, more than one-third of long-term care insurance applicants are denied, according to 2020 data from the American Association for Long-Term Care Insurance.
More than half of applications for those age 75 and older are denied.
Long-term care insurance costs by age
Once you hit your 60s, insurance prices start to go up significantly as well.
The following is an example of how monthly premiums increase based on an applicant’s age.
These estimates, provided by a Mutual of Omaha calculator, assume a single female in Manhattan is applying for coverage of $5,000 a month for 36 months.
- Age 45: $234 per month
- Age 55: $293 per month
- Age 65: $422 per month
- Age 75: $820 per month
While most policies are designed to have level premiums, there is no guarantee they won’t go up, Ardleigh says. Premiums may also depend upon whether someone is buying insurance as part of a couple and what elimination period is included in the policy. The elimination period is the amount of time that must pass after you begin needing care before benefits are paid.
Buying some coverage is better than none
Ardleigh recommends her clients buy policies that have, at a minimum, a $5,000 a month benefit for 24 months. A higher monthly benefit means the opportunity to stay in a nicer facility should you need care. However, purchasing more than three years of coverage may be unnecessary for many people, since the average nursing home stay lasts just two to three years.
If a policy with those minimums is too expensive, any coverage will be better than no coverage.
“Imagine it’s snowing,” Ardleigh suggests as an analogy. “Anything you put on is going to help when you go outside.”
While a light jacket isn’t as good as a heavy winter coat, it’s better than walking outdoors without any outerwear.
If you can’t afford a traditional long-term care policy or aren’t sure if you’ll need long-term care, a hybrid life insurance policy is another option. These policies provide coverage for long-term care, and any benefits not used during the policyholder’s lifetime are passed on to heirs as a death benefit.
“We’re definitely seeing people who are younger buying long-term care insurance through hybrid policies,” Ardleigh says.
While not everyone will have the same long-term care insurance needs, everyone needs to have a long-term care plan. Talk to a trusted insurance broker and get quotes from several companies and product lines to help you decide what is the best way to prepare for covering the costs associated with home health, assisted living and nursing home care.
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