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Why seniors should apply for long-term care insurance before 2025
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In the final weeks of the year, many Americans may find themselves doing a retrospective look at their economic health with an eye toward what can be improved in 2025. A variety of economic factors affected Americans this year, ranging from a significant drop in inflation to multiple interest rate cuts to multiple record-breaking days on the stock market. And while these elements, on the surface, are all positive, it will still take some time to recuperate from the inflationary period of recent years. And this will require smart decision-making, particularly for seniors with a limited budget.
This will extend to a review of their insurance protections, both what they require and what they may be able to comfortably eliminate or reduce coverage on. For many, a long-term care insurance plan could be worthwhile. This unique policy can cover costs associated with nursing homes, assisted living facilities and in-home caretakers, among other features. But the timing surrounding an application is critical to get right. And in the final weeks of the year, there’s a compelling case to be made for applying for long-term care insurance now, before 2025. Below, we’ll explain why.
Start exploring your top long-term care insurance options here.
Why seniors should apply for long-term care insurance before 2025
Are you a senior considering a long-term care plan now? Or are you exploring the benefits for a family member or loved one? Here are three reasons why it’s worth applying for before January 1, 2025:
Premiums will rise
Long-term care insurance works similarly to other traditional insurance policies in the sense that it becomes more expensive the older you are. So if you wait for a new calendar year to apply, you’re likely to spend more for a policy than you would have if you started the paperwork in November or December. This is why applicants in their 50s and 60s often secure lower premiums than those in their 70s (among other factors). Waiting for an ideal time to apply, then, could cost you more than you had anticipated (or can afford to budget for). Consider acting promptly, instead.
See what a long-term care insurance policy could cost you now.
Care will become more expensive
The costs of nursing homes and assisted living facilities are only expected to increase over time, underlining the importance of securing a robust insurance plan now, in advance of that rise. According to Genworth’s Cost of Care survey, the monthly median price of a home health aide in 2024 is $6,481 while an assisted living facility is $5,511 while a nursing home with a private room starts at $10,025. Those costs are all predicted to rise in 2025 to $6,675, $5,676, and $10,326, respectively. It makes sense, then, to start exploring insurance options now before the costs of these services become unmanageable.
Unforeseen economic factors could impact your ability to pay for help
You may feel that you have the economic means to pay for this care in the future, rendering a long-term care insurance policy ineffective. But as has been seen in recent years, unforeseen economic factors could impact your ability to pay for help, potentially even in the final weeks of the year.
Inflation rose in October, after all, and if it rises again in November the interest rate cuts once predicted with high certainty for December could be paused – or rates could even rise. This will make everyday borrowing more expensive, reducing your budget to pay for items that a long-term care insurance policy can help cover. So weigh these unknowns carefully versus the benefits of simply locking in protection right now.
The bottom line
The benefits of a long-term care insurance policy are substantial. To make a plan truly cost-effective seniors should time their application carefully. For many, this may mean acting before 2025 to get ahead of policy cost increases. As with all insurance policies, however, it’s critical to weigh the costs versus the benefits to determine the true value, particularly in today’s evolving economic climate. So start by speaking with a long-term care provider who can answer your questions.
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Homeowners looking to access a large sum of money in today’s economic climate don’t have to look too far to find it. By turning to their accumulated home equity, owners can potentially finance a major expense (or multiple major expenses) simply by using the money they already have via their home’s value.
While there are multiple ways to do this, many may be considering a traditional mortgage refinance or cash-out refinance. But in today’s unique and constantly changing interest rate climate, that could prove to be a costly mistake. Instead, right now, both home equity loans and home equity lines of credit (HELOCs) are arguably better than refinancing. Below, we’ll explain why.
Start by seeing what home equity loan interest rate you could qualify for here.
Why home equity loans are better than refinancing right now
Here are three reasons why a home equity loan may be more beneficial than a refinance now:
You’ll maintain your existing mortgage rate
The average home equity loan interest rate is 8.41% as of November 19, 2024, but the average mortgage refinance rate for a 30-year loan is 6.93%. So, on the surface, it appears that refinancing is cheaper. But that refinance rate will require you to exchange your current mortgage rate to get the new one.
That could be a costly mistake if you have a rate under 6.93%, as millions of Americans do right now. By applying for a home equity loan, however, you’ll still gain access to your equity, but you won’t need to bump your mortgage rate to get it. And if home equity loan rates drop in the future, as they have for most of 2024, you can simply refinance your loan to the better rate then.
Get started with a home equity loan online today.
You may qualify for a tax deduction
When you use a cash-out refinance, you apply for a loan larger than what you currently owe to your lender. You then use the former to pay off the latter and keep the difference as cash for yourself. Interest paid on mortgage loans is tax-deductible, but so is the interest on home equity loans if used for qualifying purposes. At that higher interest rate, you may qualify for a larger deduction (while still maintaining your current lower mortgage rate).
The average home equity amount is high right now
A combination of low mortgage interest rates during the pandemic, a drop in available inventory and a hesitation to sell now that rates are high again (amid other complex but interrelated factors) has caused the average home equity amount to soar to just under $330,000 right now. If you want to access that with a refinance, as noted, you’ll need to give up your current mortgage rate to do so. And if you want to access it via a credit card or personal loan, the restrictions will be significant. It makes sense, then, to take advantage by using a home equity loan or HELOC instead of taking a gamble with a refinance right now.
The bottom line
With mortgage refinance rates elevated, the unique feature of a potential tax deduction tied to home equity borrowing and a six-figure average equity sum available now, for many homeowners in need of financing it makes sense to skip a refinance for a home equity loan now. That said, this type of financing is tied to your most important financial asset so the decision to withdraw it from it should be carefully weighed against the risks. Consider speaking to a financial advisor or home equity lender who can answer any questions you may have before getting started.
Speak to a home equity loan lender now.
