When is the Best Time for Purchasing Long Term Care Insurance?

Purchasing Long term care Insurance (LTC) is a complex issue for many people. There are several factors to consider, not the least of which is when one should buy LTC insurance--if one should.

Many financial experts say that nobody who has a net worth of at least $2 million should pay for an LTC policy; their own assets will be able to cover all long term care services should they ever need them. On the other hand, they also advise that anyone who is worth less than $200,000 simply cannot afford long term care insurance (the premiums aren't the cheapest, compared to other forms of insurance) and will have to rely on government assistance programs--Medicare and Medicaid--if they ever need long term care.

On the other hand, the cost of actual long term care (stay in a nursing home, stay in an assisted care facility, or in-home special nurse care) is enormous and one the rise. Surveys have shown that as of today the average cost of staying in a nursing home is $213 a day (rates vary depending on geographic location) and can be expected to pass $400 a day by the year 2030. On average, once a person enters a nursing home facility they stay two-and-a-half years. Going by today's rates that's over $194,000; the future projected rate means you'll pay approximately $372,000. And 45% of all Americans who live to 65 or older can expect to need some form of long term care. Even people who are only 32 years old are six times as likely to need long term care as they are to die in their near future.

Suddenly, premiums of $750 to $1500 per year don't sound all the expensive, do they? However--only 9% of Americans will need to stay in a nursing home, with another 18% needing long term assisted living facility care. So, things get curiouser and curiouser.

However (again), "long term care" can mean care in the home by nursing specialists that lasts for a period of many months. It's this kind of care that a great many elderly Americans will need--and it's not cheap. Then there's the uncertainty principle: you never know for sure if you'll need such services or what level of service that may be if you do.

Medicare is only going to pay $105 per day of the expenses you incur between the 20th and 120th day of your long term care service. Outside of that, you're on your own (and most of these services will incur expenses of more than $105 per day). And Medicaid is nothing more than welfare--and only those who can legitimately claim to be welfare candidates (a net worth of a paltry $2,000) will receive its unlimited benefit.

The average LTC policy has a pay-out of $150 per day after a 90-day elimination period (they pay nothing for the first 90 days that you need care). Also, while premiums are never scheduled to rise, the right is reserved by the insurance provider to raise them if they need to in order to cover their costs--so you don't have a guarantee (you can get one but your premiums will automatically be higher to start with). Most people also pay for their policy's future pay-out to be adjusted for inflation, so that the $150 of today would automatically be more like $300 in 2030. Policies are different and can give you even more coverage than the average but that requires larger premium payments now.

Generally speaking, that rule of thumb about the people who are technical multimillionaires holds true. But--what if it's extremely important to you to pass on as much of your fortune as possible to your children and your grandchildren? What if a large portion of your net worth is a small business that you own and love and never want to have to sell in order to pay for long term care? Then it matters less if you could pay for it and matters more if you desire to pay for it, should you need it.

So, having said all this, when is the best time for you to buy LTC?

*You become eligible for most policies at age 40. You will get the cheapest premiums if you sign up in your 40s, of course, and that could very well be a good reason to buy it during these years. Yet, since this isn't cheap insurance and the average person is still much too healthy to worry about long term care then, there are those who would consider this age bracket too young to buy it. On the other hand, if you have a family history of serious health problems and your have hit your 40th birthday, it could be a gamble worth taking to save yourself from huge costs or even abject poverty in the future.

*How about your 50s? Well, even those who say you shouldn't buy it yet in your 50s say that you definitely start checking out and comparing different policies during these years. Keep in mind, again, you're not immune to needing long term care in your silver decade and your premiums are rising while your potential for eligibility is, statistically, worsening year by year if you don't act now.

*Your 60s? The answer is now a unanimous "yes", and the earlier in your 60s the better. 23% of those who apply in their 60s fail the physical, and that goes up to nearly one-half of all people who apply in their 70s.

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