Long Term Care Insurance

While many Americans have heard of Long Term Care Insurance, few fully understand its true benefits or cost, much less its importance and role in smart retirement planning. While many think of these long-term health plans as "nursing home insurance" they are more likely to cover care in-home or in assisted living. Statistically, you're most likely to receive care in-home (75% of claims start at home), so getting a plan to cover home health care services is of utmost importance.

Most LTCI policies will also have included benefits to pay for services like bed reservation, home modification, and even monitoring systems like Life Alert and similar. The biggest value of a policy, however, is the peace of mind in knowing that the burden of care will be covered not by already-stressed family members but by professional caregivers.

Who Are the Long Term Care Companies?

You don't want to outlive your insurance company. If you're 50 years old, you may not use your plan for 30-40 years, so a solid, reputable insurance company is important.

There are about a dozen financially-sound insurance companies that offer Long Term Care policies of various types. What makes LTC coverage so unique is that as a consumer you are purchasing an insurance policy that you are not likely to have an immediate need for. When we buy auto or home coverage, there's a chance we'll need to make a claim tomorrow.

With Long Term Care, policyholders generally purchase coverage when they're in their 50s or 60s (the average & median buyer are both 60 years old). As a young, healthy policyholder, you may not make a claim until you're in your 80s or 90s. This 30-year runway between buying and using coverage can make planning and forecasting seem like a challenging task. One smart way to approach Long Term Care planning is to determine your comfort level with partial insurance. Knowing that your LTC coverage may take a large bite out of the cost, but not pay every dime, can help to not over-insure. The marketing materials and presentations from the big insurers can be designed to put consumers on guard by describing catastrophic risk, but the reality is that the average claim is about three years and is made at home, where costs are generally less. Having a plan that covers all costs at home and most costs in a facility often makes good sense.

Cost of LTC Insurance By Age

The average buyer of Long Term Care coverage is 60 years old and healthy. After all, virtually every financial guru from Clark Howard to Dave Ramsey recommend purchasing coverage at age 60. The reasons for age sixty are plentiful.

A typical 60-year-old will:

• Have the mortgage either paid off or close.
• Have kids out of college: no more tuition payments!
• Be healthy enough to qualify for underwriting.

Consider the following chart of the "Cost of Waiting" which shows the advantage a 45-year old has when purchasing a plan versus waiting until they are 65. If you are young and healthy, and plan on living a long and healthy life, it can really pay to purchase your policy at a younger age, which is why the average age at which people buy Long Term Care Insurance is dropping.