April 22, 2019

Make long-term care coverage more affordable

By Jim Miller

Dear Savvy Senior,

I have been thinking about getting a long-term care insurance policy, but have found the monthly premiums to be very expensive. How can I find cheaper coverage?

Getting Old

Dear Getting,

Cost is usually the biggest factor that keeps most people from purchasing long-term care insurance—only around 8 million Americans currently have a policy.

Depending on your age, health and the provisions of the policy, costs can range anywhere from $1,000 up to $5,000 a year for an individual policy that covers nursing home care, assisted living and in-home care. Fortunately, there are various cost-cutting strategies that can help you save and still get adequate coverage. Here are several to consider.

Buy young

The most basic way to get long-term care insurance at a cheaper rate is by purchasing it at a younger age. For example, a typical policy that costs a 55-year-old $1,500 a year in premiums could cost a 65-year-old $3,000. Health is another fact that can affect costs. While good health can lower your monthly payments, having a preexisting medical condition can increase your costs, or you may not be able to get insurance at all.

Sign up as a pair

Many insurers offer 20 to 30 percent discounts on premiums if you sign-up at the same time as your spouse, partner or sibling.

Choose a shorter benefit period

Most people need long-term care for just under three years on average. So, by choosing a policy that covers you for two or three years, versus five or more years, it can cut your premiums by 20 to 40 percent.

Lengthen waiting period

Most policies have 30- to 90-day waiting periods that require you to pay out-of-pocket for care before the policy kicks in. By choosing a longer wait period, it can lower your premiums 15 to 20 percent.

Lower the daily benefit

You can get a policy that pays out $100, $150, $200 per day or more, but the higher the benefit, the higher your premium. So consider a plan that covers two-thirds the daily cost, and pay the other third out of savings. That could cut your premiums by about one-third.

Buy lower inflation protection

Inflation coverage protects you from the rising costs of care. Five percent compounded annually has been a common practice in the industry, but it’s expensive. Consider a policy that has a 3 percent CPI-adjusted inflation protection. This can save you 50 percent or more.

Buy a hybrid policy

If the thought of paying expensive monthly premiums for long-term care insurance—which you may never use—is keeping you from buying a policy, consider one that combines long-term care insurance with either a life insurance policy or an annuity. Hybrid life insurance policies provide a death benefit for your heirs and a pool of money you can use for long-term care. Any funds you use for care are generally subtracted from the death benefit. While hybrid annuity policies generally allows you to purchase a deferred annuity, which can be used for long-term care or if you don’t need care, it can be redeemed for its accumulated value when it matures, or left to your heirs when you die.

To find a policy that offers the best rates, get a long-term care insurance specialist who works with a variety of companies. See aaltci.org to locate one. Also shop insurers like Northwestern Mutual and New York Life, who work only with their own agents.

Jim Miller is a contributor to the NBC Today show and author of “The Savvy Senior” book.

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