Exploring LTCI
Do you need long term care insurance (LTCI)? When is the right time to purchase a policy? Phil Dyer, CFP, answers your LTCI questions.

The decision to purchase LTCI often is considered by many people as they near retirement age. But escalating nursing home costs (the national average now tops $70,000 a year), steep premiums, confusing policies, and a somewhat unstable marketplace all make it a difficult choice.

Do you need LTCI? Consider your current and projected financial status, health, family history, and interest in leaving an inheritance to your children or grandchildren. Geography also plays a significant role, as the highest nursing home costs are in the Northeast and on the West Coast. For instance, the average daily cost of care in Orlando, Fla., is $182 versus $331 in Stamford, Conn.—a $54,385 annual difference.

In general, if your assets are less than $300,000 and you have limited income, you probably won’t be able to afford LTCI premiums. Instead you’re likely to spend your assets down and qualify for state assistance through Medicaid. If your assets are more than $1.5 million, you probably have enough money to self-insure.

When should you buy? Although experts disagree on the right time to purchase LTCI, an often-mentioned age range is your early 50s to mid 60s. As with most insurance products, the older you are, the higher the premiums. But buying it at age 45 instead of age 60 also means you’re paying premiums for 15 more years. Don’t wait too long, though. LTCI premiums increase steeply around age 70, and most carriers will not sell you a policy once you reach 85.

What is the structure of an LTCI policy? The main components of a policy include: