The Cost of LTC Insurance

Long-term care insurance premiums are based on your age at the time you apply for coverage, so the younger you are, the less premium you will pay.

There are other factors that affect premium as well and some of the factors vary by company, so always check with an agent that specializes in long-term care insurance.

Many people have heard that long-term care insurance is expensive.  It can be, but may not be nearly as expensive as the actual cost of long-term care. A good rule of thumb is that the annual premium you pay is less than the cost of just one month of long-term care! The good news is that you have some control over what it will cost. If you plan ahead of time, and purchase long-term care insurance when you are younger and when you are in good health, the premiums for long-term care insurance can be very affordable. You also control the cost by the benefits that you choose.

The cost of a long-term care insurance policy depends on the following factors:

• Your health at the time you apply
• The length of your benefit period
• The policy’s features, benefits and options
• Discounts you may be eligible for
• Carrier you choose

Tip: Most companies will consider your actual age at the time of your application, while others base their rates on age nearest birthday. So if you have a birthday coming up, now is the time to apply to "save your age" which could save you premiums over the lifetime of the policy!

The old saying, "you get what you pay for", applies here. Long-term care insurance is the one insurance product that you do not necessarily want to get the best price on. Most major, reputable carriers price their products similarly. If you find a carrier charging considerably less, that should cause you some concern as to future premium stability.

"It is unwise to pay too much, but it is worse to pay too little. When you pay too much, you lose a little money - that is all. When you pay too little, you sometimes lose everything because the thing you bought was incapable of doing the thing it was bought to do. The common law of business prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder it is wise to add something in for the risk, and if you do that you will have enough to pay for something better." John Ruskin

Many people think that they will save money spent on premiums if they just wait to buy long-term care insurance. This is not necessarily true. The longer you wait, the more you may pay in premiums over your lifetime.

Each year that you wait:

• Increases the annual cost of the insurance because you have to buy a higher daily benefit due to the fact that the cost of long-term care has gone up.
• You are a year older so your premium will increase.
• You remain at risk in the event you have a health change and cannot qualify for coverage.

Bob is 50 years old and the annual premium is $1,338.75 in this example. If he paid this premium until he was 85 years old, he would have paid in a total of $46,856.25 in premiums.

If he waited just five years to purchase the same policy the annual premium for the same plan would be $1,974.37. The increased premium takes into account that Bob is now five years older and he should then purchase a higher daily benefit as the cost of care has most likely increased. If he paid until he was 85 years old he would have paid in a total of $59,231.10.

Waiting five years could have cost Bob an extra $12,374.85 in premiums over his lifetime - it did not save him any money, and he was also uninsured for five years.

Many policies are sold as being "level premium" for the life of the policy. Unfortunately, many consumers mistakenly believe that this means that the cost of the policy will not increase. In reality, all insurance companies reserve the right to increase premiums but the increase affects an entire class of policyholders.

Check with your state insurance department to find out about the premium-rate increase histories of both the company and the specific policy you are considering.

It is important to point out that despite long-term care insurance seeming expensive, the alternative (having no long-term care insurance) is much more costly! Considering the cost of long-term care today - a single year of needing care would have paid for many years of long-term care insurance premiums!

This web site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice. You may wish to consult a competent attorney, tax advisor, or accountant. PLEASE NOTE: If there are links on this page they are provided strictly as a courtesy and the pages referenced are maintained by external sources. There is not guaranteed as to the accuracy of the information contained in the web sites you are linking to.

Copyright © 2009