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Long Term Care Insurance Cost

what is the cost of long term care insurance

Last Updated January 16, 2014

Long Term Care Insurance cost varies depending on numerous factors such as age, health, the state you live, and benefits.  Long Term Care Insurance can be surprisingly affordable if you choose your benefits wisely.  Finding the balance between too much insurance and too little is important.  Like any insurance, you may buy Long Term Care Insurance and never us it so finding that balance is key.

Here are a few factors that will affect your Long Term Care Insurance cost:

While it’s true that your age affects the premium, watch out for the “birthday close” from a sales agent trying to rush you into buying right now.  Take your time.  Although your age does affect the cost by about 3-5% a year, it’s more important that you take your time and buy this at the right time.
  • Your health. The single most important aspect of this insurance is your current health.  While waiting several years to buy can seem appealing, you may be just one prescription drug away from your prices increasing drastically, or worse, becoming disqualified.
  • The amount of coverage you choose. Watch out for agents who tack on their favorite “riders ” to your plan, pushing the Long Term Care Insurance cost up.
  • The discounts available.

    Don’t miss out on discounts such as preferred health discounts or married discounts (or even partner discounts).

  • As You Age, Costs Rise

    An example of average premiums for age  55, 60, and 65.

    While those factors affect your Long Term Care Insurance cost, here’s how you can pay for your coverage.  Many people have found innovative ways to pay their Long Term Care Insurance premiums to keep costs down. Some of these ways include:

    • Using a portion of the interest earned on any given asset.
    • Using dividend income.
    • Using the interest earned on any fixed or variable annuity.

    The timeless saying, “You get what you pay for,” applies to the Long Term Care Insurance market as well.  Long Term Care Insurance is one insurance product for which you may not necessarily want to get the lowest rate.

    There are over twenty companies selling Long Term Care Insurance.  Out of those, only about ten are A rated or better and have paid over $100 million in claims. Out of

    those ten, some of the companies you would especially want to consider are Genworth Financial, John Hancock, Mass Mutual, Transamerica, and United of Omaha and Mutual of Omaha.

    Don’t Rush, But Consider the Long Term Care Insurance Cost of Waiting:

    Many people assume that they will save money if they simply wait before buying Long Term Care Insurance.  Unfortunately, what they are not taking into account are the following factors that come in to play each year they wait which will end up increasing their Long Term Care Insurance cost:

    • They will have to purchase more insurance because the cost of health care rises each year due to inflation.
    • They will have to pay higher premiums each year they wait because premiums are based on the applicant’s age.
    • Their health could change, leaving them with a much higher premium, or even leaving them uninsurable.

    Long Term Care Insurance Cost of Waiting Example

    Bill, age 50, purchases a Long Term Care Insurance policy from a major insurance carrier.  The policy includes the following:

    1. $4500 monthly benefit
    2. 4-year benefit period
    3. 90-day elimination period
    4. 3% Compound Inflation protection

    Bill’s annual premium will be $2,707.07  If he pays this annual premium until the age of 85, he will have paid a total of $94,747 in premiums.  His benefit will have grown to over $25,895/mo.

    Compare Bill’s premiums if he waited five years:

    If Bill waited just five years to purchase the same policy, his annual premium would be $3,588.92. If he paid this annual premium until the age of 85, he would have paid a total of $107,667 in premiums. 

    The increased premium cost takes into account that Bill is now five years older, plus the cost of health care has increased.  By waiting five years, Bill would pay an additional $12,920 in premiums over his lifetime.  Not only that, Bill would risk being uninsured for those five years.

    Can insurance companies increase my Long Term Care Insurance cost of premiums in the future?

    This question comes up frequently.  The answer is a qualified, “Yes.”  Insurance companies can increase your premiums if  the increase is for an entire class of policyholders and when  it is approved by your state’s insurance commissioner.  By going with a financially strong company, however, the chances of this happening are less likely but still can so be prepared.

    Category: Insurance

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