Dear Savvy Senior,
My wife and I have been thinking about purchasing a long-term care insurance policy, but have found the monthly premiums to be very expensive. How can we find affordable coverage?
Planning Ahead
Dear Planning,
The biggest factor that keeps millions of Americans from purchasing long-term care (LTC) insurance is the high price tag. Depending on your age, you and your wife could be looking at $8,000 a year (if not more) to purchase a comprehensive policy that covers nursing home care, assisted living and in-home care. Fortunately, there are ways to save and still get adequate coverage. Here are several cost-cutting tips you should know.
Buy Young
One of the most basic ways a person can lower their LTC insurance premiums is by purchasing a policy at a younger age. For example, a policy that costs a 55-year-old $2,000 a year in premiums could costs a 65-year-old more than $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.
Check Your Employer
Some employers offer LTC insurance as an employee benefit that is often five to 10 percent less expensive that buying a policy on your own. Or, if you or your wife is a current or retired Federal employee, you can get affordable coverage through the Federal LTC Insurance Program (www.ltcfeds.com).
Tweak the Policy
The cost of LTC insurance depends greatly on the policy’s previsions. Here are some simple ways to trim your premiums:
• Reduce the benefit period: A policy that covers you for two or three years, versus an unlimited benefit, meets the needs for most people and can cut your premiums in half.
• Lower the daily benefit: You can get a policy that pays $100, $150, $200 per day or more, but the higher the benefit, the higher your premium. To figure out how much coverage to get, check out the nursing home prices in the area you plan to be. Then figure out how much of the bill you could shoulder yourself, and choose a benefit that makes up the difference.
• Extend the waiting period: Most policies have waiting periods (30, 60, 90 days, or more) that require you to pay out-of-pocket before the policy kicks in. The longer you wait the lower your premium.
• Get cheaper inflation protection: Choosing a policy that offers inflation protection linked to the consumer price index is about 20 to 40 percent cheaper than standard policies that use a 5 percent compound inflation factor.
Get State Help
Many states today have a LTC partnership program that can help you save. Under these programs, if you buy a LTC policy approved by your state Medicaid agency, you can protect an amount of assets from Medicaid equal to the benefits that your policy pays out. How does it work? Let’s say you buy a policy that provides $200,000 in benefits (multiply your daily benefit by your benefit period). If you use up all the benefits but still need care, you can shield $200,000 of your assets and still have Medicaid pay your remaining nursing home bills. With this program, you can choose a shorter benefit period which will lower your premiums. Contact your state insurance department to see if your state offers a program or see www.dehpg.net/ltcpartnership.
Add a Supplement
Another option to consider is Uncle Sam’s soon-to-be-established LTC program known as the Community Living Assistance Services and Supports (CLASS) Act – see healthcare.gov. Starting in 2013, this program will allow workers to set aside money from their paychecks for five years, in order to receive a cash benefit of at least $50 a day to help pay for LTC services when needed. While CLASS won’t cover all your LTC costs, it can work as a nice supplement to a LTC policy allowing you to lower your daily benefit and reduce your premiums.
Savvy Tips: For more information, visit www.longtermcare.gov. And for assistance in finding and choosing a policy, get a LTC insurance specialist who works with a variety of companies to help. See www.aaltci.org to locate one.
Send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070, or visit www.savvysenior.org. Jim Miller is a contributor to the NBC Today show and author of “The Savvy Senior” book.