Surveys show approximately 90% of Americans don’t have long-term care (LTC) insurance even though statistics indicate 68% of people who reach age 65 will require some type of non-medical LTC as they get older. Without LTC insurance, the high cost of custodial care in a nursing home can wipe out your Thrift Savings Plan (TSP) nest egg. However, since LTC insurance premiums are based on your age and health, premiums will be higher if you wait too long to buy a policy.
LTC Is Not Covered By FEHB Or Medicare
While FEHB and Medicare usually cover your approved medical needs when you’re in a long- term care facility, these health insurance plans will not cover the cost of non-medical, custodial care. Without LTC insurance, you’ll likely pay for custodial care out of pocket. The monthly cost of custodial care in a nursing home can run as high as $10,000 per month or more depending on where you live. If you’re in relatively good health, applying for LTC insurance before your enter your 60s may help you secure a more affordable premium.
“Add to this, LTC insurance premiums are generally higher for women because they have a longer average life expectancy than men.”
What’s The Sweet Spot For Purchasing LTC Insurance?
Deciding when to purchase LTC Insurance depends on your age and your overall health when you get the policy. Of course, you can purchase LTC coverage when you’re still relatively young and healthy. But then you’ll be paying premiums for a long time before you may actually need LTC. If you wait too long, your age can make you a higher risk which will drive up the cost of premiums. Add to this, LTC insurance premiums are generally higher for women because they have a longer average life expectancy than men.
According to a recent article published on the Yahoo News website, the average cost for a policy with an initial value of $165,000 (and 2% inflation growth) is considerably higher at age 65 than at age 55:
- Men at age 55: $1,650 per year ($137.50 per month)
- Women at age 55: $2,725 per year ($227 per month)
- Men at age 65: $2,600 per year ($227 per month)
- Women at age 65: $4,230 per year ($352.50 per month)
What Happens If You’re Denied LTC Coverage Based On Your Health?
If you wait too long to purchase a LTC policy and develop chronic health conditions, you may be denied coverage. One option is to purchase a Lifetime Annuity and add a rider that provides LTC coverage. Consider working with an FRC® trained advisor who can help you compare insurance products designed to help cover the high cost of long-term care in retirement.
Sources:
https://www.cbsnews.com/news/why-you-should-buy-long-term-care-insurance-before-you-reach-60/
https://finance.yahoo.com/news/quoted-7-000-per-long-123000289.html
