Buying long-term care insurance (LTC insurance) in your 50s is a smart decision, considering the cost of long-term care in the U.S. According to New York Life, the average annual cost of a nursing home is $96,000 and rising. Assisted living or home care can run $50,000 per year for quality care.
If you are in your 50s and thinking about buying long-term care insurance, don’t let the idea linger. This article provides all of the information you need to find the right long-term care policy. We also explain why buying long-term care insurance in your 50s is more advantageous than waiting until you are in your 60s or 70s, and dissect the common long-term care policy to help you understand each variable.
Quick Article Guide:
1. Do I Need Long-Term Care Insurance?
2. Age and Long-Term Care Insurance Rates
3. What Type of Long-Term Care Setting Do You Want to Be In?
4. Calculating Your Daily Benefit Amount
5. Choosing an Elimination Period
6. How Long Does Long-Term Care Insurance Last?
7. How Does Being Married Affect Long-Term Care Insurance?
8. Protecting Your Long-Term Care Insurance from Inflation
9. Get a Free Long-Term Care Insurance Quote
Everyone likes to think that they are aging gracefully. Even if that’s the case, the reality is that you will likely require some sort of assistance with daily activities later on in life, perhaps even sooner than you think. The U.S. Department of Health and Human Services (HHS) estimates that 70 percent of people over the age of 65 will need some form of long-term care during their lifetime. Many will require support and services for several years, which can lead to high medical costs for family members. By 2050, the number of individuals using paid long-term care services is expected to exceed 27 million.
Long-term care insurance can help offset the high cost of a nursing facility, assisted living facility, or home care service. It is a niche insurance product covering care costs for activities of daily living (ADLs) that many elderly patients need assistance with. ADLs include:
- Household tasks, etc.
Medicaid, Medicare, and health insurance typically do not cover these costs, which is why long-term care insurance is sold as either a standalone product or as an add-on in a whole life insurance policy. It’s important to understand that long-term care insurance is not the same as health insurance; it should be purchased in addition to any health coverage you already have.
Long-term care insurance runs linear to life insurance in terms of the relationship between age and cost of coverage. In life insurance and LTC insurance, age is a means of measuring health, and thus an indicator of the insurer’s risk.
Simply put, the older you are, the more likely you are to have health problems, and thus the more expensive long-term care coverage will be.
Many people purchase long-term care insurance around the age of 50, when they realize the cost of their parents’ care. This is a good move, as the American Association for Long-Term Care Insurance (AALTCI) explains that the average annual rate increases are 2-4 percent in your 50s before jumping to 6-8 percent in your 60s. AALTCI uses a real-life example to put numbers to the notion:
“You are age 55. You want what we term a “standard” plan of coverage. That equals $172,600 in current benefits (based on a $150 daily benefit for a 3-year plan). Your cost is $1,084 per year because you qualify for the preferred health discount (spousal discount too).
Long-term care insurance protection should grow to keep pace with rising costs. The one we are illustrating does. So, by age 65, the $172,600 benefit you bought at age 55, will have grown in benefit value to $276,000. Someone age 65 (today) would pay $3,275 for $276,000 in coverage because it’s very unlikely they will still qualify for that good health discount.”
AALTCI’s example is from 2010, so we pulled real-life LTC insurance rates from March 2017 to illustrate the difference between buying long-term care insurance in your 50s and buying the exact same policy in your 60s.
Real-Life LTC Insurance Rates (March 2017)
$200,000 benefits, $5,000 per month in benefits, no deductible for in-home care, 90-day deductible for facility care.
50-year-old male: $73.80/month
50-year-old female: $110.77/month
55-year-old male: $85.55/month
55-year-old female: $131.80/month
60-year-old male: $105.44/month
60-year-old female: $165.85/month
65-year-old male: $152.41/month
65-year-old female: $236.13/month
As you can see, the cost of a policy at age 50 can more than double by age 65. Again, this is because at age 65, you are a higher-risk policyholder than you were at age 50. The bottom line here is that you want to lock in your LTC insurance while you are young and healthy. If you wait too long and develop serious health issues, you might not even be able to qualify for LTC coverage. Kiplinger explains this possibility in detail:
“Buying while still in good health has become more important as insurers tighten underwriting standards. Some companies have added blood-test requirements and started scrutinizing family health history for conditions such as heart disease and dementia. One-fourth of applicants age 60 to 69 are rejected, and 44% of those age 70 to 79 are denied coverage, according to the long-term-care association.”
Waiting until later in life to purchase long-term care insurance might mean cutting back on your long-term care when you do need it, because you will have to pay more for less coverage.
For example, you might have to choose a shared room rather than a private room. The quality of your facility might be four stars instead of five. Or, you might be living in Miami, Missouri when you really want to be in Miami, Florida. If you are the type of person who values comfort or perhaps all-out luxury, don’t let the window of opportunity close on favorable long-term care insurance rates in your 50s.
The core of any long-term care insurance policy is the daily benefit amount, which is the amount you will be reimbursed each day for the cost of your long-term care services.
Going back to the $96,000 per year average nursing home cost, you can expect to pay roughly $260.00 a day for a quality nursing home. So, we recommend buying a long-term care policy with a daily benefit amount of $250.00 to $300.00 per day. Kevin Leinum, owner of Capstone LTC Insurance Services, tells us, “Most people who have long-term-care coverage wish they had bought more.”
Genworth’s long-term care calculator is a great tool to help you come to a ballpark daily benefit amount. You can also call JRC Insurance Group directly at 855-247-9555 if you would like personalized assistance. We are independent agents, which means we come to work solely to help clients find the right life insurance and long-term care insurance for their specific needs. Rest assured we will not try to sell you a bill of goods!
A long-term care insurance policy does not begin until after an agreed upon period of time passes, usually between 30 and 180 days. This is called the elimination period, during which time you are fully responsible for any long-term care costs. While a longer elimination period might save money on the front end of your policy, the savings are often negated by increased costs once the policy does begin. Long-term care insurance companies tend to have the most aggressive rates for policies with a 90-day elimination period.
Elimination Period Rules of Thumb
- If you don’t have a large savings set aside and cannot comfortably afford several months of paying 100% cost on long-term care, select a policy with a shorter period. The difference between the cost of LTC insurance and the cost of LTC itself can be tens of thousands of dollars, even in the short term.
- If you’re more concerned with the monthly cost of your coverage and you have an ample amount of money set aside for your retirement, consider a longer elimination period.
Similar to term life insurance, LTC insurance lasts for a set period of time. Most LTC insurance policies offer a term of three to five years. The longer the term, the more the policy will cost. The average stay in a nursing home is 2.3 to 2.6 years, so three years will often suffice. However, if your immediate family has longevity, you may want to consider spending the extra money for longer lasting coverage.
Kiplinger suggests married couples consider sharing their long-term care insurance, and we can confirm the validity of this recommendation. Married couples see roughly 10-15% lower LTC insurance rates than single applicants. If you and your spouse, or domestic partner, apply for long-term care life insurance together, you can expect a discount of up to 35 percent. This is because the insurance company assumes that your spouse or partner will be able to provide some of the care needed in your latter years, delaying an influx of daily care costs with a provider or care facility.
If you buy a policy now and do not activate it for 10 or 20 years, inflation can diminish its value significantly. Adding a feature called “inflation protection” to your policy can help account for the rising cost of care. Most LTC insurance policies offer 3-5% compounded inflation protection; the higher inflation protection percentage you choose, the higher the cost of your policy. But again, the extra cost can be worth it to know that you’re covered.
Buying long-term care insurance in your 50s doesn’t have to be a game of guessing and Googling. Let JRC Insurance Group help you secure an affordable and reliable long-term care insurance policy, so you can stop worrying about unexpected health costs and start living your life more freely.
Call us toll-free at 855-247-9555 to speak with one of our agents today! There is no obligation or cost for our services, just friendly guidance from industry experts.
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