Here are a few suggestions that we hope will help you in your search for affordable long-term care insurance. Long-term care insurance is known to be pricey, which isn’t strange when you think about the escalating costs for long-term care and the fact that so many of us will need long-term care at some point of our lives.
Sign-up when you’re in your 50s
The American Association for Long-Term Care Insurance (AALTCI) recommends that individuals take out a policy in their mid-50s. Of course, the AALTCI isn’t exactly an impartial source, but there is actually some merit to this advice.
- Generally speaking, the younger you are, the lower the insurance premium. (Of course, you will also start paying this premium earlier if you sign up at a young age.)
- The longer you wait to sign-up for LTCI, the higher the risk that something will happen to you health-wise that will cause your premiums to skyrocket or even disqualify you for LTCI. In the United States, the Affordable Care Act doesn’t cover LTCI policies which means that it is legal for the insurer to exclude customers based on pre-existing medical conditions. If several low-cost insurers disqualify you, you may be forced to go with one of the more expensive insurers if you want to have any LTCI at all.
Statics provided by the AALTCI for the year 2012 show that a U.S. couple aged 55 would pay from $2,080 to $4,824 per year for a benefit of $164,000 each. For a U.S. couple that wanted to purchase LTCI when they were already 60 years old, those figures would instead be $2,794 – $5,637.
You can read more in our article “What’s the recommended age for getting LTCI?”
Sign up as a couple (not just for married folks!)
Many insurance companies will give you a substantial discount if you sign up as a couple. With many of them, you don’t have to be a married couple to sign up together – they will accept other couples as well, e.g. two siblings signing up together or you signing up together with your domestic partner. Getting a 20% – 30% discount is not unusual, so this is definitely something to consider if you are looking for ways to decrease the premiums for long-term care insurance.
Extend the waiting period
With a standard home insurance or car insurance, you can usually get down the premium by picking a policy with a higher than normal deductible. You agree to foot the bill for insured costs up to a certain amount, before the policy kicks in and pays the rest.
With long-term insurance, you can achieve a similar thing by picking a policy where the waiting period is longer than normally. With a 30 day waiting period, you would only need to pay for your own long-term care for 30 days before the insurance policy kicked in. With a 120 day waiting period, you will pay for your own long-term care costs for roughly four months before you get any help from the insurance company.
The most commonly available waiting periods are 30 days, 60 days, 90 days, and 120 days. LTCI where the waiting period is just 30 days tend to have much higher premiums than LTCI policies where the waiting period is 120 days or more.
If you have some savings stashed away and feel confident that you would be able to pay out of pocket for your long-term care costs for more then 30 days, you can usually save quite a lot of money on the insurance premium by choosing a long waiting period.
Increase the $$$ deductible
Some LTCI polices have a traditional deductible, e.g. one where the insured must pay for the first $2,000 of long-term care expenses before the insurance kicks in and begins to pay. You can usually negotiate a lower monthly premium if you agree to a higher deductible.
Decrease the benefit period
An LTCI policy that only covers 2 years of long-term care will of course have lower premiums than a policy that will pay for 5+ years of long-term care. Policies that provide coverage for a limited period tend to be much less expensive than those that will keep you covered for the rest of your life.
Limiting and decreasing the benefit period can cut your premiums by 40% or even more. It should be noted however that it is a risky move. Just as there is no way of knowing if you will ever need long-term care, there is also no way of knowing how long you will need it for if you ever need it.
Decrease the daily benefit
Most LTCI policies will have a cap for daily long-term costs. Generally speaking, the higher the cap, the higher the premium. This is why going with a $100 cap instead of the $400 cap can save you money on premiums. Of course, this also means that your options will be more limited if you ever need long-term care. You may have to forgo that nice $250 a day nursing home and check yourself into the $90 a day facility instead, unless you can afford to pay the difference out of pocket.
For many, increased flexibility is the main reason why they want to purchase long-term care insurance in the first place. This is especially true in countries where low-cost tax funded long-term care is available and private LTCI is used by those who wish to be able to decline that option and go with more expensive private care alternatives. If you get a long-term care insurance policy with a very low daily cap, you might have to settle for a care alternative that doesn’t provide any higher quality of living than the tax-funded option.
Location of care
The cost of an LTCI policy can be impacted by the covered location or locations of long-term care. Always check out the coverage for various options, such as in-home care, nursing-home care, adult daycare, and other facilities that provide professional long-term care.
Also check the geographical limits of available care options. Are you limited to care options located within a specific state or province, or can you use your policy nationwide?
Check out partnership programs
In the United States, over 40 states have long-term care partnership programs that can help people save money. You can sign-up with a long-term care insurance policy that is approved by your state’s Medicaid agency and thereby protect an amount of assets from Medicaid equal to the benefits that your policy pays out. Contact your local state or province to find out more about what’s available in your area.
Employment & LTCI
There are employers that provide long-term care insurance for their employees, either completely or through a co-pay system where the employee pays part of the insurance premium. Some of these policies negotiated by employers will even provide coverage for the family of the employee, including parents. Always check with your employer to find out what’s available to you. It can also be an interesting subject to bring up during salary negotiations; some employers are more willing to provide this type of benefit than increasing the salary.
Always check if you are covered only for long-term care needs that appear while you are still employed, or if you will be covered even after retirement. It is also important know how moving from one employer to another will impact your coverage.
If coverage it tied to your current employment, it is advisable to find out if you can keep your cover even after leaving your employer if you take over responsibility for the premium payments. Not having to negotiate new LTCI when you are older and maybe also suffering from some health problem can be worth a lot.
Compare different insurance companies and policies
There are a lot of different companies selling long-term insurance cover and you may even encounter several different LTCI policies offered by the same insurance company. This makes it very important to shop around and compare the various offers, instead of just going with the first one you come across.
Make sure you know what you get for your money. Is this policy more expensive because it provides much better and more comprehensive coverage than the others, or can I find an equally suitable LTCI policy with a lower premium? Also try to figure out exactly what kind of coverage you want and need, so that you can seek out such policies instead of ending up comparing several dozen policies that are all unsuitable for you.
If you enlist the aid of an insurance agent, keep in mind that many of them only work with a very limited set of LTCI providers and will not check out all possible policies for you. Also, kick-back systems can create a conflict of interest. Even an insurance agent that works with over half a dozen different providers can have incentives to guide you in the direction of a specific provider or policy since that is the one that gives the agent the best commission.
By a hybrid policy instead
With a classic long-term care insurance policy, you will be paying rather steep monthly premiums to protect you against long-term care costs that you may never end up having. While this is the nature of most types of insurance, it is also understandable that many people is reluctant to take on yet another premium cost on top of their home insurance, car insurance, health insurance, and so on.
A more tempting alternative can be to sign up for a hybrid policy instead, such as a policy that combines long-term care insurance cover with life insurance. Generally speaking, funds used to pay for your long-term care will be subtracted from the death benefit. The less money used to pay for your long-term care, the larger the death benefit paid out to your heirs when you die. This means that if you die without ever needing long-term care, you haven’t paid all those premiums for nothing – your heirs will benefit from your life insurance.
Another solution is to use a hybrid policy that combines long-term care insurance with an annuity policy. If well constructed, such as possible can provide you with a high degree of flexibility since you can use it to pay for long-term care, or redeem it for its accumulated value when it reaches maturity and use the money for something else, or simply leave the money to your heirs.
Warning: Not having inflation protection is risky
One way of getting the premium down on long-term care insurance is to forgo the inflation protection. While this might feel tempting right now when we have enjoyed a period of very low inflation, it is a risky move that can leave you without adequate LTCI cover in the future. You don’t want to end up in a situation where you have diligently paid your premium each month only to find out that when you need long-term care in the year 2040, that $180,000 coverage without inflation protection is sufficient to pay for 60 days in a nursing home and not a day more.