3 Good Reasons to Get Long-Term Care Insurance

Long-term care insurance, or LTC insurance, isn't well understood by many Americans, especially those who aren't yet at retirement age. However, a good time to start thinking about this type of insurance is when you're about a decade away from retiring.

With that in mind, here are three points to consider as you decide whether getting LTC insurance could be a smart move for you.

1. It can happen to you

You might not realize it, but you're likely to need some form of long-term care later in life. In fact, about 70% of people aged 65 and older will require a nursing home stay or an in-home caregiver, or will need to be housed in an assisted living facility at some point in their lives, according to LongTermCare.gov. This fact should give you pause to consider purchasing insurance to pay for it.

2. Long-term care can be expensive (and isn't covered by Medicare)

Many pre-retirees don't realize just how expensive long-term care costs can be. And you don't want to get hit with sticker shock when you eventually need a long-term stay at a nursing home or an in-home health aide. But here are a few statistics to put things into perspective:

• The average cost of a private room in a nursing home is more than $100,000 per year, and it can be much more if you live in a high-cost-of-living area.
• 15% of people will pay more than $250,000 in long-term care costs. And this is in today's dollars.
• The median cost of in-home care in the U.S. is $30 per hour. If you need care for eight hours every day, this translates to $87,600 per year.

It's a common misconception that expenses like nursing home stays and in-home caregivers will be covered by Medicare, but this is usually not the case -- especially if the care is needed for a longer period.

LTC insurance benefits typically kick in after a certain waiting period (90 days of needing services is common), and most policies provide benefits for one to five years, usually with a per-day maximum.

3. It's cheaper if you act early

The cost of LTC insurance can vary dramatically depending on the policy you want, as well as your personal health, gender, and other factors. But one of the biggest determining factors when it comes to LTC insurance costs is your age when you get the policy.

Here's one reason to get LTC insurance now as opposed to waiting: The average annual premium for a 55-year-old man in 2022 with $165,000 in level benefits was $950. It would be nearly double that amount if you wait until 65 to get a policy.

Many people might think that paying for LTC insurance in their 50s is a waste of money that could be used elsewhere in their budget. But while you aren't likely to use the benefits when you're that young, buying early can save you a lot of money over time.

It's also worth noting that if you're married, you can buy a single LTC policy for both spouses, and this can be a great way to make your premiums more affordable. It's typically cheaper than buying individual LTC policies.

The bottom line

LTC insurance can prevent unexpected long-term care costs from depleting your retirement nest egg. With a roughly 50-50 probability that you'll need long-term care at some point, the high costs of care that aren't likely to get any lower, and the ability to lock in a lower premium by purchasing a policy before you retire, it could be a smart idea to take a closer look at LTC insurance as part of your retirement planning.