Long-Term Care Insurance Costs Vary

Read Time: 6:48
Published: Feb 20th, 2017
Long-Term Care Insurance Costs Vary
Article Updated:January 6th, 2021

Several articles in various publications are discussing the costs of Long-Term Care Insurance. Many of these articles are factually misleading or inaccurate in many ways. Old "legacy" policies have had premium increases; however, today's Long-Term Care Insurance is affordable for many American families, especially for those who plan in their 40s or 50s before retirement. Plus, these plans are custom designed. 

So, where do you start to get accurate information? Generally, your computer, smartphone, or tablet. If you are like many people these days, you probably start with the internet to research products and services. It is easy and convenient. It can also be a maze of inaccurate or misleading information. When you search for long-term care planning and long-term care insurance, you can find a wide variety of material. These articles suggest anything from LTC insurance is affordable and essential to very expensive and not necessary.

Get Accurate Information on Long-Term Care Insurance

Now what? First, understand everyone has a point of view, and the internet is the ultimate in free speech. So, you should review sources and use some common sense.

First, if you have first-hand knowledge of a parent or family member needing extended care, you know the consequences of long-term care on family and finances. The financial and emotional impact is tremendous. If you have not yet had one of these experiences, then you need to review the facts.

The US Department of Human Services says there is a very good chance you will need long-term care services in your lifetime. While this doesn't mean everyone will need full-time care, but it does mean your risk is high as you get older. With medical science advancing, we live longer. As you age, you will need help with daily living activities or require supervision due to memory loss. We need long-term care due to illnesses, accidents, or the impact of aging.

Preapare Before Retirement as Your Health Changes with Aging

You probably have already noticed changes in your health, your body, and as you get even older, your mind. These changes will often lead to your need for help with daily living activities or even supervision due to cognitive decline.

The risk of Alzheimer's disease and other types of dementia increases with age. 1-in-9 Americans over 65 have Alzheimer's disease. (Alzheimer's Association). One-third of Americans over age 85 are afflicted with the illness. (Alzheimer's Association). 1-in-3 seniors die with Alzheimer's or another kind of dementia. (Centers for Disease Control). The proportion of People with Alzheimer's Diseasein the United States by Age: (Alzheimer's Association) 85+ years – 38%, 75-84 years, 44%, 65-74 years, 15%, <65 years, 4%. Alzheimer's is only one type of condition which can cause the need for care.

Health insurance and Medicare(including MedicareSupplements) will only pay for a small amount of long-term skilled care. They pay nothing toward long-term custodial care (help with daily living activities or supervision due to cognitive issues). Custodial care is the type of care most people will need on an extended basis.

Truth - LTC Insurance is Affordable and Rate Stable

Long-Term Care Insurance is very affordable for many people and an easy way to protect your future retirement assets. This protection includes your 401(k), 403(b), IRA, and other savings. Also, these plans can help ease the burdens placed on your family during a long-term care event. Without an advance plan, a family member, spouse, daughter, or daughter-in-law become the default caregivers. This puts an incredible burden on them emotionally, physically, and financially.

You may have read that these policies are expensive. While you could design a very expensive plan, it generally would lead to being over-insured. For example, a married 50-year-old male, In excellent health could have a plan from a major Long-Term Care insurer company for as little as $130 a month or less. In this example, its initial benefits would be $3,500 a month, a $150,000 pool both growing 3% compounded every year. What this means is the benefits, not the premium, increase every year.

By the time the 50-year-old reaches 80, they would have a $364,089 pool with $8,495 a month available to them all tax-free. In a partnership state (which provides additional dollar-for-dollar asset protection), you have even more protection. Most experts suggest you have enough benefits to make a catastrophic situation manageable. If you live in a state where the cost of long-term care is very high (northeast or northwest, for example), you will increase the benefit. 

LTC Insurance is Custom Designed

If you have a strong family history of memory loss or other health issues that cause longer extended care situations, an Long-Term Care Insurance specialist may recommend more extensive initial benefits. There are options for unlimited long-term care benefits available.

Don't forget many tax incentives are available when you purchase an LTC policy. You can also use a health savings account to pay for premiums as well on a pre-tax basis. While most people are buying LTC insurance in their 50's and even younger, if you have stable health, you can obtain quality protection at affordable premiums in your 60's.

"A typical couple where both spouses are age 60 will pay between $100 and $150 a month each for  American Association for Long-Term Care Insurance (long-term care insurance protection."  The AALTCI is a national consumer education and advocacy group.

 Jesse Slome, director of the AALTCI).

“This has never been a one-size-fits-all product, and many consumers are regrettably presented with just one option, often the most costly." 

Jesse Slome

Premiums Can Vary Over 100% Between Companies

Costs for virtually identical policy coverage still vary significantly from one insurer to the next. "Insurers each set their own rates, and the price for virtually identical coverage can vary," Jesse Slome states. Premiums can vary as much as 100% for the exact same coverage. – "You generally only buy Long-Term Care insurance once, so it's important to do it correctly the first time," Jesse Slome said.

Considering the costs of Long-Term Care, this is a bargain. The insurance companies are paying benefits in a big way. The nation's long-term care insurance companies paid $11 Billion in claim benefits in 2019 according to the AALTCI.

You may also have read about rate increases. Much of the press on this is overblown as pricing on very old policies were way too low for many benefits and underwriting risks they were taking at that time. Plus, the low-interest-rate environment we have had for so many years has created many of these issues.

Rate Stability RulesProvide Peace-of-Mind

The good news is today: insurance companies have priced plans based on the low-interest-rate environment. Regulations require more advance thought in the pricing of products before they even hit the market. The regulations don't mean there is no risk, but you can feel good about today's products' pricing.

Rate stability rules are in force in most states, and they require very conservative assumptions than ever before. It makes the chance of future increases low, according to a study from the AALTCI. You can read the article discussing the study by clicking here.

Some plans guarantee no rate increases if you feel you must have one for peace-of-mind. Limited pay options are also available where you pay premiums for only ten years, and you have a fully paid policy. There are also asset-based "hybrid" policies that also offer death benefits.

Seek Help from LTC Insurance Specialist

Find a specialist in Long-Term Care Insurance who works with all the major companies, not just one or two. Be sure they have real-world experience. The AALTCI suggests three questions to determine an insurance professional's expertise in the field:

  1. How many years have you focused on long-term care planning? 
  2. How many long-term care insurance policies have you sold? 
  3. How many long-term care insurers are you appointed with?

An experienced specialist will have at least 300 or more clients with a Long-Term Care Insurance policy. Your top industry specialists may have thousands.

You can find a trusted and experienced specialist by clicking here.

The financial costs and burdens of aging are real. The ability to safeguard your future and provide for peace-of-mind should be an essential part of your overall retirement plan. 

About the Author

An LTC News author focusing on long-term care and aging.

Editor's Note

LTC NEWS offers multiple tools and resources to help you research the financial costs and burdens of aging so you can find an affordable solution. 

Find all the resources on LTC NEWS by clicking here.

One of the best tools is the LTC NEWS Cost of Care Calculator. You can find the current and future costs of long-term health care where you live. This information will help you design an appropriate LTC Insurance policy.

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LTC News Contributor James Kelly
James Kelly

Contributor Since
August 21st, 2017

LTC News author focusing on long-term care and aging.

About the Author

LTC News author focusing on long-term care and aging.

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