Many people do not start to think seriously about the costs of long-term care until they are 60 years or older, possibly because they now have parents in need of long-term care or because their own health or the health of friends within their own generation is beginning to show signs of declining.
This is a bit of a problem, since you can usually negotiate a much lower premium if you sing up for long-term care insurance (LTCI) when you are still in your mid-50s. Of course, signing up early also means starting to pay premiums at a younger age, so you need to weigh the pro’s and con’s here.
Your age at sign-up will determine the premium
When you are in your 50s, you can expect that for each year you wait to sign up for LTCI, the premium will go up by 2% – 4%. Once you get into your 60s, each year you wait will make your premium 6% – 8% higher. Of course, these are just general averages, and not necessarily true for each individual applicant.
Being denied LTCI
Waiting until later in life to sign up for long-term care insurance doesn’t only mean paying higher monthly premiums – it will also increase the risk of having your application for LTCI declined completely. For each year you wait, you risk developing some kind of medical problem that will increase your risk of being disqualified for LTCI. You can also find yourself in a situation where you are approved, but only by fairly expensive insurance providers. When you purchase LTCI at a younger age, you are more likely to still be eligible for all types of LTCI policies and be seen as a desirable client by all LTC insurance providers.
In the United States, the Affordable Care Act prohibits insurance companies from excluding consumers from health insurance based on pre-existing medical conditions. Many people think that this law protects them from being excluded from long-term care insurance as well, but that is not true. Long-term care insurance is not covered by the Affordable Care Act and you can be legally excluded because of a pre-existing medical condition. This is why it is advisable to sign up sooner than later.
According to U.S. statistics obtained from the American Association for Long-Term Care Insurance (AALTCI), approximately 23% of LTCI applicants in their 60s were declined, while that number was just 14% for applicants in their 50s.
Don’t overdo it
With that said, rushing out to get an LTCI policy in your 40s or younger is probably not a a wise decision either, unless there are some pressing circumstances present.
Even though it is true that a person of any age can need long-term care, we are much more likely to need this type of care when we are 70 years old or above. Signing up for LTCI at a young age usually means paying premiums for many, many years before actually receiving any benefit from the policy.
Finding money in the budget to pay the premiums can also interfere with other insurance needs that could be more important for someone in their 40s or younger, e.g. a life insurance policy that would help underage children financially if they lost a parent or a mortgage loan insurance policy that would ensure that a young widow wouldn’t have to sell the family home in a hurry after losing her husband.
There are situations where signing up for an LTCI even though you haven’t turned 50 yet can be a good option to consider. Individuals where there is a family history of early-onset dementia may for instance benefit from obtaining LTCI coverage at a young age.