Here’s this month’s New Jersey personal finance question: “What is the best age to apply for long-term care insurance? And is it worth it?”
Long term care insurance: worth it?
Let’s start with a definition. What is long term care insurance?
Long-term care insurance pays a daily or monthly benefit to compensate you for the cost of having someone help you with activities of daily living, such as eating, getting dressed, taking a bath, etc. These payments occur over a certain amount of time, called a benefit period. You either receive payments from the insurance company to be applied toward the cost of long-term care, or you may be reimbursed for payments you made.
It is unlikely that an insurance policy will fully cover the cost of long-term care given how expensive it can be depending on the level of care needed. It provides a “cushion” to these costs and may relieve responsibility from family members who are expected to provide care to their loved ones.
When should I get it?
When should you buy a policy? Typically, it is most economical to apply in your early or mid-50s.
- Insurance companies generally have very limited options if applying at young ages, such as 30 and under
- If you buy too young, the premiums will be lower – but it’s not usually advantageous as you will be paying premiums for many years
- Premiums get very expensive if you wait until you’re in your 60s or 70s
Is it worth it?
Is it worth it? Premiums can be expensive, and not everyone will require long-term care. So should you do it?
It’s hard to say without knowing the details of your personal situation, but it’s important to consider the impact not having coverage could have on your financial future as well what alternatives may be available. Self-insuring may be best if your cash flow and assets can sufficiently cover anticipated expenses without significantly impacting your estate planning and gifting goals. On the other hand, if you have very low income and minimal assets then you may qualify for Medicaid which will cover long-term care. However, it should be noted that Medicaid does not often provide the best level of care.
Conclusion
The decision to purchase long-term care insurance is a highly personal one that depends on many factors, including your family’s health history. It’s best to map out a financial plan, even if you are decades away from needing it, and consider it as one of the many insurance avenues that should be explored to protect your assets and financial future. For example, disability insurance is often overlooked by high earners and young business owners.
If you have any questions, send me a message.
-Shaun