How to Reduce Long-Term Care
Insurance Costs
While long-term care insurance can be a
good way to pay for a nursing home stay or a home health
care worker, it doesn't come cheap. Annual premiums vary
significantly, depending on your age, health, and the type
of policy, but policies can run as high as $5,000 per year.
You do not need to pay that much, however. The following are
some ways to reduce your costs.
Shorter Benefit Period
 The most significant cost-saving step you
can take is to not purchase a lifetime policy. Unless you
have a family history of a chronic illness, you aren't
likely to need coverage for more than five years. In fact a
new study from the American Association of Long-term Care
Insurance shows that a three-year benefit policy is
sufficient for most people. According to the study of
in-force long-term care policies, only 8 percent of people
needed coverage for more than three years. By purchasing
coverage for three, four, or five years instead of a
lifetime, you can save thousands of dollars in premiums. If
you do have a history of a chronic disease in your family,
you may want to purchase coverage for 10 years, which would
still be less than purchasing a lifetime policy. Buy
younger. Long-term care insurance premiums rise as you age,
so the younger you buy, the cheaper your premiums. Be
careful, however, because insurance premiums can, and often
do, increase considerably from your initial purchase price.
Even if you have a policy that is "guaranteed renewable,"
your premiums can still increase. For more information,
click here.
Shared Care Policy
If both you and your spouse are purchasing
long-term care insurance, a shared care policy might be able
to give you more coverage for less money. With a shared care
policy, you buy a pool of benefits that you can split
between you and your spouse. For example, if you buy a
five-year policy, you will have a total of 10 years between
you and your spouse. If your spouse uses two years of the
policy, you will have eight years. A shared care policy may
cost more than separate policies with the same benefit
period, but it will allow you to buy a shorter policy,
knowing that you have a pool of benefits to work with.
Longer Elimination Period
Most policies have a waiting period before
coverage begins, typically 30-90 days. The longer you make
this waiting period, the cheaper your premiums. Keep in
mind, however, that you will have to pay for your care out
of pocket until the waiting period is over and the insurance
begins its coverage.
Reduce the Daily Benefit
Instead of purchasing the maximum daily
benefit you might need in a nursing home, you can consider
paying for a portion of the daily benefit yourself. You can
then insure for the maximum daily benefit minus the amount
you plan to pay. A lower daily benefit will mean lower
premiums.
Inflation Protection
 Inflation protection increases the value
of your benefit to keep up with inflation and is almost
always recommended. But you can save on premiums by which
method of protection you choose: compound-interest increases
or simple-interest increases. If you are purchasing a
long-term care policy and are younger than age 62 or 63, you
will need to purchase compound inflation protection. This
can, however, more than double your premium. If you purchase
a policy after age 62 or 63, some experts believe that
simple inflation increases should be enough, and you will
save on premium costs.
You should also remember that your
premiums may be tax-deductible. Premiums for "qualified"
long-term care policies will be treated as a medical expense
and will be deductible to the extent that they, along with
other unreimbursed medical expenses (including "Medigap"
insurance premiums), exceed 7.5 percent of the insured's
adjusted gross income. |
