Don’t Wait Too Long: Start Long-Term Care Insurance

Long-Term Care Insurance Explained: When to Start

Financial planning for retirement goes far beyond investments and private pensions. A critical, yet often overlooked component is long-term care insurance (LTCI).

Despite its importance, many people postpone purchasing LTCI until they consider it “really necessary,” usually after age 60. This approach can be financially risky.

What is Long-Term Care Insurance?

LTCI is a specific type of insurance for prolonged care, which can take place at home, in specialized facilities such as nursing homes, or in assisted living facilities.

It does not replace traditional health insurance, Medicare, or Medicaid, but complements these coverages, especially considering that Medicare only covers limited, short-term care.

Long-term care expenses in the U.S. can be substantial:

• Private nursing homes: USD 100,000 to USD 150,000 per year
• Assisted living facilities: USD 50,000 to USD 70,000 per year
• Home care: approximately USD 25–30 per hour

These amounts vary by state but illustrate the magnitude of the financial risk associated with not having LTCI.

Why starting early matters

There are three main reasons to begin LTCI coverage as soon as possible:

1. Lower premiums: Insurers determine cost based on age and health. A 50-year-old will pay significantly less than a 65-year-old. Purchasing early allows you to maintain coverage for life, avoiding drastic premium increases at older ages.
2. Broader eligibility: The younger and healthier you are, the higher your approval chances and the fewer medical restrictions. Delaying coverage can result in pre-existing condition exclusions, which may severely limit benefits.
3. Strategic financial planning: LTCI allows you to protect accumulated assets such as savings, investments, and home equity, which could otherwise be rapidly consumed by long-term care costs.

In short, timing is critical to balance cost, coverage, and eligibility.

Essential components of LTCI

Before purchasing, it is important to understand the typical structure of long-term care insurance:

• Daily benefit: The maximum amount the policy pays per day of care.
• Benefit period: The total number of years the policy covers, usually between 2 and 5 years, but can extend to lifetime coverage.
• Elimination period: The waiting period before benefits begin, typically 30 to 90 days.
• Inflation protection: Automatic adjustment of benefits to keep pace with rising medical costs over time.

Choosing these components carefully is essential to ensure the policy is sufficient when care is actually needed.

Common myths about LTCI

Many people hesitate to buy LTCI due to misconceptions:

• “I won’t need ”it”—Studies show that over 70% of adults over 65 will require some form of long-term care.
• “Medicare or Medicaid covers everything”—Medicare only covers short-term care, and Medicaid requires low income and limited assets.
• “It’s too expensive”—Although premiums may seem high, compared to the actual cost of care, LTCI is an investment in asset protection.
• “It’s too early to ”worry”—Waiting increases costs and may prevent approval due to medical conditions that develop with age.

Understanding these myths helps make decisions based on facts rather than misconceptions.

Strategies for choosing the right policy

Selecting the appropriate LTCI involves a detailed analysis of personal needs and financial situation:

1. Determine the level of care needed: Evaluate family history, personal health, and life expectancy.
2. Choose adequate coverage: Base the daily benefit on regional average costs and adjust for the type of care expected.
3. Consider additional benefits: Coverages such as home care, assisted living, and inflation protection can be decisive.
4. Compare providers: Companies like Genworth, New York Life, and Mutual of Omaha have different pricing, eligibility, and benefits policies.
5. Analyze your budget: Premiums should be sustainable without compromising other financial goals, avoiding future policy lapses.

Integrating LTCI into financial planning

LTCI should be treated as a wealth protection tool, not just health insurance. It integrates with:

• Retirement strategies, helping preserve 401(k)s, IRAs, or investment portfolios.
• Estate planning, protecting home equity.
• Family risk management, ensuring children or dependents do not absorb unexpected costs.

Additionally, some states offer tax incentives for LTCI, making it an even more strategic investment.

The cost of waiting too long

Procrastination has tangible consequences:

• Higher premiums due to older age
• Greater risk of medical exclusions
• Possible inability to obtain coverage due to pre-existing conditions
• Exposure to the risk of rapidly depleting savings and assets

In many cases, delaying LTCI transforms a predictable problem into a real and potentially devastating financial risk.

Written by

Gabriel Gonçalves