When Should You Apply for Long-Term Care Insurance?

At some point, older adults may need help completing basic activities like getting dressed and taking baths. Unfortunately, health insurance plans rarely cover this kind of care. This is where long-term care insurance comes into play. If you’re not sure how it works, here’s everything you need to know about when you should apply for long-term care insurance and why you might need coverage. If you’re looking for a full financial roadmap, consider working with a financial advisor. 

What Is Long-Term Care Insurance?

Most long-term care insurance policies cover custodial and personal care when you cannot perform at least two activities of daily living (ADLs), such as bathing, dressing, eating, toileting, continence and transferring. Covered services often include home health aides, adult day care, assisted living facilities, memory care units, and nursing home stays.

Policies generally also cover care coordination services, respite care for family members, and some modifications to the home, like ramps or grab bars, if they are medically necessary. Hospice care and care for dementia or Alzheimer’s disease are typically included.

What long-term care insurance does not cover are standard healthcare costs, such as doctor visits, hospital stays, surgeries, or prescription drugs. Most policies also exclude coverage for care provided by family members, treatment for mental or nervous disorders (other than dementia), and services outside the United States unless you purchase an international rider.

Coverage limits apply. Many policies pay a daily or monthly maximum benefit (for example, $150 per day or $4,500 per month) and set a total lifetime cap (often three to five years of coverage)¹. Once you reach those limits, you must cover the remaining costs out of pocket.

Should You Apply for Long-Term Care Insurance?

This can be a difficult question for adults to answer. Predicting whether you’ll contract a disease or become disabled when you grow older can be nearly impossible, even if you know you’re genetically predisposed to develop a certain medical condition.

Part of the problem with long-term care insurance is the fact that it’s usually expensive. After all, senior care isn’t cheap. According to the latest data from the Kaiser Family Foundation, a non-profit that monitors health industry trends, in 2023 the median annual costs for full-time homemaker services in the U.S. were $62,400². The costs climb to $68,640 for full-time home health aide care, $116,800 for a private room in a nursing home, and $288,288 for round-the-clock home health aide services. 

Medicaid is one alternative to long-term care insurance. But it’s only available to low-income individuals. Does that mean you’re stuck buying a long-term care policy?

Research indicates that most people don’t need to apply for long-term care insurance. While many seniors will need access to some form of extended care, some studies suggest that these services are often only necessary for a short period of time. A recent study from the Department of Health and Human Services found that only 24% of older adults receive more than two years of paid LTSS care, and only 15% spend more than two years in a nursing home. Most older adults receive this support from family and other caregivers.

If you can afford to pay for long-term care insurance premiums, it may be worth purchasing. The AARP recommends applying for long-term care insurance if you have more than $75,000 in assets (not counting your home)³. 

When to Apply for Long-Term Care Insurance

If you’ve decided that you want long-term care insurance, it’s best to enroll in a policy sooner rather than later. According to data from the Center for Medicare and Medicaid Services, the average annual rate increase is 3.4% per year after you turn 55. And the American Association of Long Term Care insurance recommends looking for policies as early as age 52. 

Insurers take many different details into account when deciding whether to offer someone insurance coverage. If you’re an older adult and your health isn’t great, you could be denied a policy. If you are eligible for coverage, you could get stuck with high insurance premiums. Your best bet is to buy long-term insurance coverage while you’re still relatively young and healthy. That way, you’ll qualify for premiums that are more affordable.

How to Enroll in a Long-Term Care Insurance Plan

Before applying for long-term care insurance, it’s important to compare policies and rates. You’ll also need to figure out how much insurance you need. Some companies that offer long-term care insurance include Northwestern Mutual, Genworth Financial and Transamerica.

You can call and ask for a quote. Then you can speak with an insurance agent who can help you find a long-term care insurance product that meets your needs. Once you’ve purchased a policy, you usually can’t access your benefits until you’re unable to complete two or more activities of daily living (such as dressing, eating, bathing and walking). That is something you should keep in mind before deciding to move forward with a specific policy.

Bottom Line

Long-term care insurance can help cover the cost of services like home health care, assisted living and custodial care, but the premiums are often high and rise with age. Purchasing a policy earlier can lower the annual cost, though it also means paying premiums for many years before benefits may be used. The decision often depends on factors such as your current health, family medical history, available assets and whether you want to protect your estate from future care expenses.

Tips for Insurance Planning

• A financial advisor can guide you in selecting insurance that fits your needs and provides appropriate protection. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Want to figure it out on your own but you’re not sure where to start? Use our calculator to help you figure out how much insurance you need.

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