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Insurance & Money Management for Seniors
How to Reduce Long-Term Care Insurance Costs
By ElderLawAnswers.com
 July 20, 2006 - 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.
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● 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. According an article in
Kiplinger's, only 8 percent of
70-year old claimants will need coverage for more than five years. By
purchasing coverage for 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 purchase coinsurance to help cover the daily benefit. You can
then insure for the maximum daily benefit minus the coinsurance amount.
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.
>> For more on long-term care insurance,
click here.
>> For more from ElderLawAnswers.com
click here.
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