Long-term care insurance: Who needs it and when to buy it
Most people will need some form of long-term care as they get older. Planning for that care is one of the biggest challenges older Americans face.
Enter long-term care insurance, which helps cover the costs of extended medical care whether you’re at home, or in a nursing home or adult day care. Long term insurance policies can help but they are more expensive, and the longer you wait to buy, the higher your premiums will be. And that’s if you can get the policy out at all.
The sweet spot for taking out a long-term insurance policy is between your mid-50s and 60s, experts say. At that time, you will still be healthy enough to qualify for low premiums by comparison but old enough that you probably won’t pay into the insurance plan for longer than you need to.
Who really needs to buy long-term care insurance?
The longer you live, the more likely you are to need long-term care, says Jesse Slome, executive director of the American Long-Term Insurance Association.
“When you’re 90, you just can’t do the things you did when you were 60 or 70,” he said. Long-term care involves someone helping an older person manage those tasks – legally called “activities of daily living” – including grocery shopping, meal preparation and eating.
Someone turning 65 today has about a 70% chance of needing some form of long-term care, and 5 in 10 older adults will need care for five years or more, according to the Department of Health and Human Services. And yet, 48 percent of seniors say they don’t know how to plan for their long-term care needs, according to the University’s National Poll on Healthy Aging.
Contrary to popular belief, Medicare does not cover long-term care costs. Long-term care services that are paid for today are covered by Medicaid, although they must meet income requirements to qualify and they won’t kick in until you pay what you can out of pocket. Private sources (including illegal payments from consumers and private insurance) covered about 30% of long-term support services, according to a recent report prepared by members of Congress.
Just because you will need some type of long-term care doesn’t mean you should opt for a long-term insurance policy. Instead, some people may intend to rely on partners or other family members as unpaid caregivers. (Although experts recommend that you still talk to your caregivers and make a plan ahead of time.)
In particular, wealthy people with significant assets are more likely to outsource their medical needs, said R. Tamara Konezka, a professor at the University of Chicago who specializes in health economics and long-term care.
Low-income people, on the other hand, may struggle to pay the premiums tied to Long Term Care Insurance, and may not have the savings built to cover all of their needs down the line. In that case, it may be better to exhaust whatever funds they have and rely on Medicaid should they end up needing long-term care services.
That leaves middle-income Americans with good retirement savings as the ideal audience for long-term care insurance.
“The product appeals to the middle game, older adults who really know how to deviate and don’t want to, let’s say, burden their children with care,” said Ketzka. “They just want to have their ducks in a row.”
When should you buy long-term care insurance?
One of the most common calls Slome receives is that the organization is from children of adults asking about insurance that can help pay for a parent who is looking at a nursing home or is already using a home care plan. And each time, he has to tell them that they are too late: if you already care, you will not be able to buy the program again.
“You can’t buy car insurance after you’ve been in a car accident,” he says. “It’s not a form of insurance.” Instead, he adds, you should buy when you’re young and healthy enough to qualify.
That’s why he says that most people want to wait to buy a policy at 65. At that time, you are eligible for Medicare. On the bright side, that means you can take advantage of free medical exams. The worst, when it comes to long-term care, is that those tests do not appear to protect against medical conditions that may drive the value of your policy.
Most insurers require you to answer questions about your medical history before issuing a plan; Some may also need medical records. And companies know what medical conditions and medications to watch for, Slome said.
In fact, the policy denial rate rises to 38% for people ages 65 to 69, up from 30% for people ages 60 to 64, according to the Long Term Care Association. The denial rate jumps even higher for those in the 70-year-old bracket, to 47%.
Not only are your chances of rejection lower if you buy up front, but you’ll pay less, too. Premiums depend on a variety of factors, including your age, gender, marital status, medical history and the inflation protection you choose. Here’s a breakdown of the average cost of a plan with $165,000 in benefits, which means that’s the maximum the insurance company will pay. (Profit Rates are usually set at a certain amount per day or per month, which is higher.)
Average annual premiums for term life insurance policies with interest rates of $165,000
Tips for Buying Long Term Care Insurance
Unlike other types of insurance, you usually buy term insurance once. As long as you keep paying your premiums, the company can’t drop you.
“It really pays to talk to someone who knows what they’re doing,” Slome said. (The Slome organization does not directly sell insurance, but you can call it talking to experts in the field.)
There are many types of policy that fall into two broad categories. The first includes single, traditional long-term care policies; The second includes linked policies that are paired with other products, such as life insurance. Rates and discounts vary between insurers, and benefits, too.
Dick Weber, who offers insurance premiums, agrees that it is important to find a broker who knows the field. While there is no single certificate that you would want to obtain expertise, it is recommended to ask the agents how long they think they have been an insurance agent, what steps they have taken to take care of long-term care and whether they have any recognition or certifications.
You should also ask them if they are considered a fiduciary for you and your insurance needs, which means that their main responsibility is to give advice that benefits you – not to sell you strategies that get them to issue kickbacks.
Editor’s note: This story was originally reported and published in August 2024. We have updated to include the latest statistics on long-term care.
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