One of the most often asked questions is how much does Long-Term Care Insurance cost. You would think that would be an easy answer. It is not, and since it is a complicated answer, many people get frustrated. That is very understandable.
The first thing to know is Long-Term Care Insurance is custom designed. There is no fixed cost. The policyholder gets to decide the amount of coverage they wish to have in place.
Plus, there are several types of policies available. The types include traditional plans (which can be partnership certified), asset-based or "hybrid" plans that include death benefits, and even limited duration (short-term) policies.
You Design Your Plan - Cost Varies with the Design
You first select a maximum daily or monthly benefit. This is the amount of money you have available to pay for care each day or each month. There is a difference between a daily benefit and a monthly benefit.
WIth a daily benefit, the insurance company only considers the charges you incur each day and apply your insurance benefit to that amount. For example, if you have $100 a day and your bill is $90, the insurance company will pay $90. If your bill is $110, the insurance company will pay $100, and you will pay the remaining $10.
Simple enough - except, what happens if you have three providers on one day for your in-home care? You might go over your daily benefit and incur a larger out-of-pocket expense. The next day, however, you may have few expenses and not come close to going over. For this reason, many insurance companies offer monthly benefits.
With a monthly benefit, the insurance company looks at all the month's charges and applies your benefit toward those charges. You have less out-of-pocket expense, and your family doesn't need to micromanage your care. The monthly benefit is preferable, and some companies offer either one or the other OR allow you to choose monthly benefits at a higher premium.
Lifetime Benefits vs Benefit Periods
Then the policyholder selects a maximum lifetime benefit. This lifetime benefit is the amount of money available in the policy on day one. For example, if you have $200,000 as a maximum lifetime benefit, consider it as an account where you have $200,000 available.
Don't be confused with benefit periods. Some companies calculate the maximum lifetime benefit by using a benefit period multiplied by the daily or monthly benefit. Some consumers and insurance agents/financial advisors think of it as a stopwatch. If you have a three-year maximum lifetime benefit, it does not mean you only have three years of care available.
Do the math. $5000 a month with a three-year maximum lifetime benefit means:
(5000 x 12) x 3 = 180,000
Inflation Benefits Add to Cost
Another wildcard is inflation benefits. Often a policyholder will select inflation benefits since they are purchasing a plan in their 40s, 50s, or even 60s. The cost of care will increase over time, and the policyholder wants their benefits to grow as well.
If the policyholder selected 3% compounded as their inflation option, both the daily or monthly benefit and the maximum lifetime benefit increase every year by 3% compounded annually.
In 20 years, that $5000 a month is now worth $10,469 a month. The maximum lifetime benefit is now worth $376,880.
Generally, most Long-Term Care Insurance claims start with in-home care. You might start with needing care four days a week for five hours each day. Meaning you would NOT use the maximum amount of benefits available. You don't lose the benefits - they stay in the benefit account, AND if you have inflation as an option, they continue to grow even as you take money out of the policy.
As you can see, there really is not a 'benefit period,' just a benefit account.
Your Choices Reflect Premium Cost
Depending on your choices, policy costs will vary.
There are also many "riders" or options an individual can add to their policy. The options include shared spousal benefits, several types of inflation options, restoration of benefits provisions, and more.
Premiums are also calculated using several factors. These factors include, but are not limited to:
- age at application
- family history
- spousal or partnership status
- the state where you live
- tobacco use
Then, premiums vary dramatically between insurance companies for the same benefits. The premiums can vary, in some cases, over $100%!
How Do You Get the Question Answered - How Much Does it Cost?
So, when you ask the question, "How much does a Long-Term Care Insurance policy cost?" - there is no easy or quick answer.
The question of cost requires questions. It requires a conversation to get accurate information. A Long-Term Care Insurance specialist will be able to ask the questions necessary to correctly and accurately answer them.
It would be best if you spoke with a specialist that works with the major companies. Therefore, you can be able to shop all of them at once and find the best coverage at the lowest cost based on your age, health, and family history. Insurance rates are regulated, so no one agent or advisor can give you "a deal."
Many People Find LTC Insurance Affordable
Many people have found that the premiums were lower than what they expected. However, depending on the type of insurance agent or financial advisor you speak with, you may see artificially high premiums.
Specialists understand policy design, underwriting, and claims, in addition to working with the top companies in the industry.
People in their 40s or 50s can find premiums from $100 or less a month on up. It depends. However, one thing is always true - the longer you wait, the more you will pay for coverage.
Don't forget, as you get older, you also experience changes in your health and body that also impact underwriting and cost. Long-Term Care Insurance is medically underwritten, so your fairly good health today is essential in obtaining coverage.
Find a Long-Term Care specilaist that can answer your questions and give you accurate quotes from the major companies - click here.