What Is Best Age to Buy Long Term Care Insurance?

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What Is Best Age to Buy Long Term Care Insurance?
What Is Best Age to Buy Long Term Care Insurance? (Image: Charles R Anderson)

Long-term-care insurance can pick up the slack between your savings and the potential costs of extended care in some sort of nursing home or assisted-living facility, or at home. As people live longer, the incidence of serious health problems may also increase. The costs of providing care can be astronomical, and may well exhaust an individual's financial resources. Buying this type of coverage is complicated, and involves multiple considerations.

Significance

Many people will need extended nursing or other assisted care for months, or even years. Such care can be extremely costly, running into hundreds of dollars a day. Unless their personal financial resources are significant, most people may feel they need to somehow insure against this eventuality. Since rates increase with age and developing health issues may make this insurance more costly, the general feeling among consumer advocates is that you should start thinking about long-term-care insurance when you reach 60. People with chronic illness could consider it at an even earlier age.

Features

Long-term-care (LTC) policies attempt to fill the gap between personal savings and the projected costs of supportive care. By paying a premium starting in the younger years, these plans promise to pay at least a portion of the supportive health care given in institutions or at home. The younger a person is, the lower the premiums are. The healthier an individual is, the easier it is to get LTC insurance. There are two forms of LTC insurance: qualified and non-qualified. Qualified plans conform to the Health Insurance Portability and Accountability Act (HIPAA), and payments from a plan are usually tax-free. Payments for premiums may be deductible if a person exceeds the 7.5 percent of adjusted gross income level on the federal income tax. Non-qualified premium payments are not tax-deductible.

Considerations

Selecting an LTC insurer is one of the most difficult financial decisions. Particularly if he is starting a policy in middle age, the buyer will have to trust that the company will be around and solvent 20 or 30 years in the future. Every policy has multiple clauses that may exclude conditions or make it difficult to actually receive benefits. Increases in caregiving costs and inflation over the years might make what once looked like adequate coverage not all that helpful when it is finally needed. Since the average age of admission to a nursing home is 83, many people will pay for many years before needing the policy. Premiums that seemed affordable at 60 may become burdensome at 80. However, if payments are not kept up, the policy will lapse.

Benefits

Having an LTC insurance policy can provide a measure of relief from worrying about how you might care for yourself in your last years of life. It hopefully takes away the burden that could be imposed on your children or other relatives. Depending on the policy, coverage should be provided for nursing care both in nursing homes and assisted-living facilities. Home-care benefits should cover adult day care, as well as hospice services. If you are living with a caregiver, coverage for temporary overnight or special day times is important to provide the caregiver with a break.

Warning

These policies are sold by agents who have a vested interest in making sales. Sometimes, 50 percent of the first year's premium goes to pay the agent. Do as much personal research as possible, looking at and comparing a number of policies on the bases of cost, coverage, waiting periods and the financial stability of the insurer before you make any decision. Unless the policy includes inflationary coverage to ensure that benefits increase with care costs, the current amounts may turn out to be insufficient when they are needed. Statistics suggest that policies that cover more than 4 years are seldom necessary--but of course, this will depend on an individual's mental comfort level.

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