Six Tips on How to Reduce Long-Term Care Insurance
Costs
Annual premiums vary by age, health, and type of
policy but can run as high as $5,000 a year
By
ElderLawAnswers.com
June
30, 2008 - 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. Following are six tips to reduce
your costs.
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1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
For more on long-term care insurance by
ElderLawAnswers.com,
click here.
For up dates to this article since 6/26/08,
click here
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