The Cost of Waiting to Purchase Long Term Care Insurance


By Pamela D. Wilson, MS, BS/BA, NCG, CSA

As I say frequently about an intention to purchase long term care insurance, sometimes it is just too late.  I met with a married couple who were interested in long term care insurance but were well aware that together, they could only afford a premium of $3,000 per month.  They mentioned they thought about looking into long term care insurance several years ago and were unable to find the time.  Now because of their age and diagnosed health conditions, they are unable to afford the policy premium.

Looking at a policy for a healthy forty-three year old it is easy to see the benefit. For a policy that offers a 3 year benefit, a 90 day elimination period the annual premium is $1413.  If this person waits until they are fifty years old assuming perfect health, the same policy would have an annual premium of $2,199, however the likelihood of not having at least one health diagnosis by the age of fifty is very low.  Seven years in the realm of health makes a significant difference in the cost of a long term care insurance policy if health changes.

Health conditions change and are diagnosed overnight. One day you are healthy, the next day you are diagnosed with diabetes or high blood pressure or another chronic disease. A premium for a healthy person at $2,199 might increase to $2,700 for someone with a variety of health concerns.  Other questions I commonly hear are that people think they are “too young” to purchase long term care insurance. In my opinion, no one is ever too young. There is a significant benefit to purchasing early – preferred health and lower premiums. The next concern I hear is that the person will be paying for the policy “forever”.

Forever is relative in terms of benefit versus cost.  Looking at an annual premiums for a 25 year old versus a 55 year old, both that use the policy when they are 85. The 25 year old pays $1000 for 60 years or a total cost of $60,000 The 55 year old pays $3000 for 30 years or a total cost of $90,000. Who comes out ahead paying less in total premium? The 25 year old pays significantly less in total premium over the same number of years.  And today the cost of one year in a long term care community is $72,000 while the benefits available through a policy are often in the hundreds of thousands of dollars if inflation protection was purchased.  Costs of care increase on average 6% a year.

And last, but not least, policies have an optional rider called “restoration of benefits”. This is especially important for younger purchasers. This rider means that if a person is in an accident that places their policy into effect and the policy is used for one year, the entire benefit of the policy is restored.  The policy continues to grow with the selected inflation option so that the policy can be used again when the individual is older and needs care. This is an extremely valuable benefit for only a small addition to the base premium.

If you believe long term care insurance is in your future, don’t wait to purchase a policy.  Remember, there is a cost to waiting and sometimes it is too late and you will not qualify or if you do qualify you may be unable to afford the annual premium.

© 2012, 2013, Pamela D. Wilson.  All Rights Reserved.

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