How Much Does Long Term Care Insurance Cost?
Here's how the amount of your premium is computed.
The actual cost of long-term care insurance varies widely, depending on the options you choose and the pricing policy of the insurance carrier. Ever shopped for whole life insurance? If you have, you might have been confused by all the "features" companies use to make the comparison shopping of coverage difficult for us buyers. It's the same, alas, in much of the long term care insurance market.Factors that can make your costs zoom, for example, are inflation adjustments that might add between 40 and more than 100 percent to your premium. However, this option can keep benefits in line with the current cost of care.
Other factors that effect your actual premium include your age, the level of benefits, and the length of time you are willing to wait until benefits begin.
Age, the the biggest factor
Back in 2001, a policy offering a $150 per day long-term care benefit for four years, with a 90-day deductible, cost a 50- year-old about $510 per year. For someone who was 65 years old, the same policy cost about $1,263, and for a 79- year-old, the cost was $5,265. The same policy with an inflation feature may cost $1,009 at age 50, $2,273 at age 65, and $7,588 at age 79. That's almost an additional 100% for inflation coverage.Ideally, premiums remain the same each year (unless they are increased for an entire class of
Benefits- The more you want, the more you'll pay.
The amount of your premium depends on the amount of the daily benefit and how long you wish that benefit to be paid. For example, a policy that pays $100 a day for up to five years of long-term care costs more than a policy that pays $50 a day for three years. A lot more!Elimination or deductible periods: this is where it gets tricky.
Here's where you have to be very sharp, and do a thorough investigation of the fine print in any policy. (This isn't the only reason to check the fine print.) Elimination or deductible periods (we're using both terms to mean essentially the same thing) are the number of days you must be in residence at a nursing home or the number of home care visits you must receive before policy benefits begin. For instance, with a 20- day elimination period your policy will begin paying benefits on the twenty-first day. Most policies offer a choice of deductible ranging from zero to 180 days. The longer the elimination or deductible period, the lower the premium. As you can imagine, a deductible in the 180 day range would cost much less than a policy with a short deductible. But would it be worth much?Longer elimination periods also mean higher out-of-pocket costs. For instance, if you have a policy with a 100-day waiting period and you go to a nursing home for a year, you must pay for 100 days of care. If your stay costs $150 a day, your total cost would be $15,000. With a 30-day elimination period, your cost would be only $4,500. As you can see, the difference is very serious money.
When you're considering a long-term care policy, you must determine, not just how much you can pay for premiums but also how long you could pay for your own care. You could decide to only insure yourself (or spouse) against a devastating emergency that requires a long stay. It's a little like buying health insurance only for serious illness like cancer or heart attacks, and paying for the small emergencies out of pocket.
More in this Plain Talk I Need To Know series
(Home) Plain Talk about Long Term Care Insurance
What is Long Term Care?
Will you need long term care, and what are the chances?
How Much Does Long Term Care Cost?
What is Insurance for Long Term care?
Where Do I Buy Long Term Care Insurance?
How Much Does Long Term Care Insurance Cost?
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