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Best age to buy long-term care insurance

What is the best age to buy long-term care insurance?

Determining the ideal age to buy long-term care insurance is a delicate balancing act. Commit too soon and you could pay premiums for 40 years or more before you collect any benefits. Wait too long and premiums may be out of your budget and your health may even disqualify you from getting coverage.

There are many opinions regarding the ideal age to buy long-term care insurance. According to the American Association for Long-Term Care Insurance (AALTCI), is that more than half of policies are sold to individuals between the ages of 55 and 64. About 20 percent are sold to people ages 45 to 54.

Considerations for when to buy

As you think about the right time to invest in long-term care insurance, consider the following:

It’s more difficult to qualify for coverage as you age. Fewer than 1 in 10 of those younger than 50 is turned down for long-term care coverage, compared to nearly 25 percent of those 60 to 69 who are rejected and 45 percent of those ages 70 to 79, according to AALTCI.

Your rates are discounted more the younger you buy. The organization’s statistics also show that 62 percent of people between the ages of 40 and 49 qualify for premium discounts due to their health, while 46 precent of 50 to 59-year-olds do and 38 percent of 60 to 69-year-olds do.

The argument for buying early

For these reasons, some experts say the best time to buy long-term care insurance is in your mid 50s. This is usually an individual’s peak earning years and a time when paying for children’s college expenses has past so premiums should be more affordable. And since many people are still relatively healthy at this age, they will likely pay far less at this stage of their lives than if they wait until their 60s.

Another argument buying early is that there’s little to no chance that premiums will be more affordable in five or 10 years than they are today. In addition to paying more due to age, insurance companies may be forced to raise rates significantly on new policies over the next decade to cover the increasing costs of long-term care. In fact, experts say that for each year you delay buying insurance, you will have to increase your coverage amount by 5 percent.

The argument for waiting

The counter argument is that people, especially those in decent health, should wait until their early to mid 60s to buy a policy. The thinking goes that these individuals may not need long-term care until age 85 to 90, or even older. Buying a policy at age 55 means 30 to 35 years or more of paying premiums, versus 20 to 25 years.

Another argument against buying too early is that insurers may introduce policies with better features in five or 10 years, leaving the one you buy today obsolete.

How to determine whats best for you

To determine the best decision for your individual needs, it’s best to run several scenarios, perhaps with the help of an agent. Get a quote for insurance costs today and how much premium you will pay over 10, 20 or 30 years. Then estimate how much premium will cost in 10 years and how much you will pay cumulatively over several periods.

Additional factors to consider when determining when to buy long-term care insurance:

Your budget today and in the future. People in their 40s and 50s are usually at their peak earnings, but at the same time have some of their highest expenses, such as paying for their children’s college. By the time they reach their 60s, they may not earn as much, but they also may be done paying for their mortgage, which would free up the funds necessary to pay long-term care insurance premiums. Determine how long-term insurance premiums would impact your budget today versus the potential impact in five, 10 or 15 years.

Your family history. If your relatives tend to live well into their 90s with few health problems, you can consider waiting. If many have required nursing home care in their 60s, you probably want to think about buying a policy early.

The bottom line is that there really is no “ideal age” to buy long-term care insurance. Every person’s situation and needs differ. The only thing you can be sure of is that the annual cost of insurance will never be cheaper than it is today.