Long term care premiums are not cheap but these recommendations may help you get a policy with an affordable long term care premium.
While it would be ideal to have complete coverage (inflation protection, lifetime coverage, at least $160/day benefit), it is better to have at least a basic policy than to have none at all. In other words, a minimum policy is better than being uncovered for the high cost of long-term care. In order to help you minimize your long term care premium, below are five ways to help you reduce costs and yet provide basic coverage. No one knows when a health catastrophe can strike. An onset of a heart attack, stroke, cancer, Parkinson's and Alzheimer's are debilitating illnesses, which give no advance warning. Protect yourself and your family financially.
Here are five ways to get covered at a lower long term care premium
1. Reduce the coverage period. For example, reduce the term of the policy from five years to four years. Statistics indicate that a four-year policy has historically covered 88% of the long-term care cases. Of course, there is no guarantee that this pattern will continue on in the future.1
2. Reduce the daily benefit. The actual cost of nursing care averages $208/day.2 If you cover just $130 or $160 per day with insurance, some people can make up the difference with other income sources, such as Social Security or interest income.3 Since use of benefits from a long term care policy may not be needed, it makes financial sense to keep your long term care premium lower and supplement your actual costs with other resources should you have a long term care need. The retirement income calculatorcan help determine if this option is suitable for you.
3. If you are age 75 or over, consider omitting the inflation protection. Although you will hopefully never need long-term care, if you do, you could need it within 10 years-by age 85. Therefore, you do not need to protect for inflation over as long a period of time as, for example, a 65-year old would need to prepare. Omitting inflation protection accounts for a BIG drop in a long term care premium.
4. Consider partial home care coverage. Many companies offer, as an example, $100/day benefit for nursing home payments and $50/day for home care payments (home care costs can be less expensive if you have family or friends who can help with care). By reducing the benefits for home care, you can lower your long term care premium.
5. Many people have a spouse or friends or relatives who can assist them in the home. Depending on the hours of needed care, the costs of a home health aid ($19 per hour on average) can be less than the costs of round-the-clock nursing home care.4 With this in mind, the most important coverage area for many is the care provided outside the home.
To approximate your long term care premium with modifications for the above options, use the long term care calculator.
1 Met Life Market survey of nursing homes, 2007.
2 Average daily rate for a private room is $77,745 annually or $6,478 monthly. Average daily rate survey of all 50 states and the District of Columbia. MetLife Market Survey of Nursing Home and Home Care Costs, 2007.
3 If you have sufficient interest income or Social Security income, it may be better for you to insure for a majority of the cost of long-term care and self-insure for the remainder. This has the effect of lowering the current cost of the insurance premiums without subjecting you to being unable to cover the costs of long-term care, if and when they arise.
4 Average hourly rate, MetLife Market Survey of Adult-Day Services and Home Care Costs, September 2007.
Other Options and Ideas